THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

HENRY  RAND  HATFIELD 
MEMORIAL  COLLECTION 


PRESENTED  BY 

FRIENDS  IN  THE  ACCOUNTING 

PROFESSION 


MODEKN 

CORPORATION   ACCOUNTING 


(VOUCHER    SYSTEM) 


INCLUDING  INSTRUCTION  IN  CORPORATE 
ORGANIZATION,  METHODS  OF  TRANSACT- 
ING  BUSINESS,  AND   BOOKKEEPING 


PUBLISHED  BY 

J.  A.  LYONS  &  COMPANY 
CHICAGO  NEW  YORK 


Copyrighted   1908 

BY 

POWERS  &  LYONS 


HF5C81, 
C7L? 


PREFACE 

Unquestionably  a  textbook  on  corporation  accounting  should  emphasize  those  account- 
ing features  which  belong  distinctively  to  corporations.  The  preparation  of  this  work 
has  been  inspired  largely  by  the  belief  of  the  authors  that  existing  textbooks  on  this  sub- 
ject do  not  emphasize  these  distinctive  features  sufficiently  to  really  teach  the  thing  for 
which  their  title  stands. 

Corporation  accounting  does  not  necessarily  differ  from  the  accounting  of  a  pro- 
prietary business  in  its  methods  of  keeping  those  records  which  express  the  relation  of 
the  business  to  others  and  exhibit  the  trading  operations  of  the  business.  The  distinctive 
feature  of  corporation  accounting  is  its  method  of  keeping  those  records  which  set  forth 
the  relation  of  the  corporation  to  its  investors.  The  number  of  individuals  interested 
in  a  corporation  is  as  a  rule  larger  than  the  number  interested  in  a  partnership.  The 
relation  of  the  stockholder  to  the  corporation  is  widely  different  from  that  of  a  partner 
to  his  firm.  The  records  which  have  to  do  with  the  investments  of  stockholders  con- 
stitute a  distinct  and  separate  phase  of  corporation  accounting  for  which  no  necessity 
exists  in  a  proprietary  business.  The  plan  of  distribution  of  corporate  profits  is  also  a 
distinctive  feature  of  corporation  accounting  which  requires  special  emphasis  in  a  work 
on  this  subject. 

The  importance  of  placing  emphasis  on  these  distinctive  features  of  corporation 
accounting  is  further  emphasized  by  the  fact  that  the  conditions  under  which  corpora- 
tions may  be  organized  and  the  plans  for  profit  distribution  are  susceptible  of  many  vari- 
ations, thus  giving  rise  to  the  necessity  for  instruction  which  will  cover  not  one  but  many 
cases.  "Modern  Corporation  Accounting"  places  the  emphasis  where  it  belongs.  Further, 
it  does  not  content  itself  with  one  opening  entry  and  one  plan  of  profit  distribution,  but 
fully  illustrates  opening  and  closing  entries  as  under  various  conditions.  This  is  done 
through  separate  exercises.  Preceding  the  principal  exercise,  or  "set,"  are  seven  exer- 
cises in  opening  corporation  books.  Following  it  are  five  closing  exercises,  illustrating 
five  different  methods  of  closing,  and  making  use  of  data  taken  from  five  different  lines 
of  business.  Incidentally  the  student  is  familiarized  with  the  accounts  used  and  the 
system  of  cost  analysis  used  in  six  businesses  instead  of  one. 

The  provisions  of  law  governing  the  organization  and  internal  administration  of 
private  corporations  vary  widely  in  the  different  states,  so  much  so  that  up  to  this  time 
no  textbook  on  the  subject  of  corporation  accounting  has  been  published  which  has  been 
fully  available  for  use  in  schools  in  different  states.  Existing  textbooks  on  this  subject, 
whatever  may  be  said  in  regard  to  their  adaptability  for  use  in  the  state  where  written, 
inflict  positive  injury  upon  students  when  taught  in  other  states — with  the  exception, 
of  course,  of  textbooks  which  side-step  the  difficulty  by  not  attempting  to  give  instruc- 
tion in  matters  of  organization  and  administration 

"Modern  Corporation  Accounting"  may  be  safely  taught  in  any  state.  In  order 
to  present  the  matter  of  corporate  organization  clearly  and  definitely,  the  instruction 
in  the  process  of  organization  has  been  made  to  conform  to  the  laws  of  one  state.  When- 
ever this  instruction  is  in  conflict  with  the  laws  of  other  states,  the  student's  attention 


M513276 


is  called  to  the  fact  and  he  is  referred  to  tabulated  information  which  sets  forth  the 
important  points  in  which  the  incorporation  laws  of  the  different  states  vary.  The 
transactions  used  in  this  work  have  been  so  prepared  that  they  are  not  inconsistent  with 
the  laws  of  any  state. 

It  is  important  that  teachers  understand  the  dangers  surrounding  the  giving  of  instruc- 
tion in  corporation  bookkeeping,  and  that  they  earnestly  supplement  the  work  of  the 
authors  at  every  point,  impressing  upon  students  the  importance  of  a  knowledge  of  the 
laws  governing  corporations,  the  danger  of  acting  without  legal  advice  in  certain  matters, 
and  the  necessity  for  care  in  following  the  laws  of  the  state  under  which  the  corporation 
exists.  A  copy  of  the  state  statutes  governing  incorporation  can  probably  be  ^secured 
free  of  charge  from  the  Secretary  of  State  in  any  state.  Every  teacher  of  bookkeeping 
is  advised  to  secure  this 

The  voucher  system  is  used.  While  the  use  of  vouchers  is  by  no  means  limited  to 
corporations,  yet  this  system  is  especially  adapted  to  the  uses  of  corporations  and  may 
be  considered  a  typical  feature  of  corporation  accounting.  The  voucher  system  would 
not  be  readily  adaptable  to  a  business  in  which  settlement  was  made  on  the  monthly 
statement  instead  of  on  the  invoice.  Its  advantages  are  particularly  marked  in  a  busi- 
ness wherein  the  preservation  of  a  receipt  for  every  disbursement  is  regarded  as  essential. 

Special  attention  is  given  in  this  work  to  the  subject  of  cost  analysis.  Cost  analysis 
is  not  a  feature  peculiar  to  corporation  accounting.  Its  presence  here  is  justified  by 
the  fact  that  the  principal  business  illustrated  is  a  manufacturing  business,  and  by  the 
further  fact  that  the  student  needs  it.  The  subject  is  an  extensive  one  and  cannot  be 
taught  in  schools  in  its  entirety,  but  no  student  should  consider  as  completed  a  training 
in  accounting  which  has  not  included  some  instruction  in  the  fundamental  principles 
of  the  science  of  costs.  His  knowledge  of  this  science  will  materially  affect  his  right  to 
be  considered  an  "accountant"  instead  of  a  mere  "bookkeeper." 

The  authors  of  "Modern  Corporation  Accounting"  bring  this  work  to  the  attention 
of  commercial  teachers  for  their  use  in  advanced  classes,  not  claiming  to  have  produced 
a  work  above  criticism,  but  confident  in  the  belief  that  it  will  be  found  to  be  a  strong 
and  well-balanced  text;  that  it  will  be  found  to  teach  thoroughly  what  its  title  indicates, 
placing  the  emphasis  where  it  belongs;  and  that  it  may  be  safely  and  consistently  taught 
in  any  school  in  any  state. 

J.  A.  Lyons  &  Co. 


MODERN   CORPORATION  ACCOUNTING 

VOUCHER  SYSTEM 

Introduction 

The  purpose  of  this  work  is  to  show  students  what  a  corporation  is,  and  how  it  is 
created;  to  give  them  in  concise  form  a  correct  idea  of  those  accounts  which  belong  pecu- 
liarly to  corporation  bookkeeping,  and  the  original  entries  which  affect  those  accounts; 
and  to  illustrate  several  processes  of  closing  the  ledger  of  a  corporation  and  distributing 
corporation  profits.  While  studying  these  things,  observing  students  will  learn  much 
that  will  be  of  general  benefit  and  that  will  serve  to  guide  them  in  possible  future  deal- 
ings with  corporations. 

DESCRIPTION 

Definition 

A  corporation  is  an  organization  formed  under  authority  of  the  state  and  endowed 
with  the  power  of  succession  and  the  privilege  of  transacting  business  as  a  single  individual. 

"An  organization."  The  corporation  is  not  an  individual  or  group  of  individuals,  but  is  a  being 
having  an  identity  separate  from  that  of  its  members.  One  doing  business  with  a  corporation  must  rely 
not  upon  the  standing  or  character  of  its  members  (stockholders),  but  upon  his  knowledge  of  the  financial 
condition  of  the  corporation,  and  upon  such  safeguards  as  the  law  has  established  in  regard  to  the  trans- 
action of  the  business  of  corporations. 

"Under  authority  of  the  state."  This  regulation  of  the  organization  and  powers  of  corporations  by 
state  statute  will  be  treated  later  more  specifically. 

"Power  of  succession."  The  death  or  withdrawal  of  one  or  all  of  its  members  has  no  effect  whatever 
upon  the  life  of  a  corporation.  Such  an  occurrence  would  merely  result  in  a  transfer  in  the  ownership  of 
the  stock  affected.  The  active  management  not  being  vested  in  the  shareholders,  changes  in  the  personnel 
of  shareholders  do  not  affect  the  conduct  of  the  corporation's  business. 

"As  a  single  individual."  This  relates  to  business  and  legal  acts  only.  The  corporation  acts  through 
its  agents  (officers  and  employes)  acting  under  authority  of  the  directors. 

Classification 

There  are  three  kinds  of  corporations:  (a)  Public  or  Municipal  Corporations;  (b) 
Quasi-Public  Corporations;  (c)  Private  Corporations. 

(a)  Public  Corporations  are  those  which  are  created  entirely  for  the  benefit  of  the 
community  at  large,  and  in  which  every  citizen  is  assumed  to  be  interested.  Their  pur- 
pose is  governmental.  Cities,  towns,  villages,  drainage  districts,  etc.,  are  public  corpora- 
tions. Not  being  organized  for  profit,  they  issue  no  stock.  They  exercise  jurisdiction 
over  given  territiories  through  ordinances  of  their  own  making. 

(b)  Quasi-Public  Corporations  (quasi  =  in  a  manner).  These  are  organizations  with 
more  or  less  public  functions,  but  not  so  fully  endowed  as  are  public  corporations.  They 
may  sue  and  be  sued  as  corporations,  and  they  may  hold  property  for  certain  purposes, 
but  they  do  not  pass  ordinances,  neither  do  they  have  a  seal.  Of  this  sort  are  school 
districts,  counties,  townships,  boards  of  commissioners  of  highways,  etc. 

(c)  Private  Corporations.     A  corporation  which  is  organized  by  private  enterprise 

5 


6  BOOKKEEPING 

for  the  financial  profit  of  its  members  is  a  private  corporation,  even  though  the  objects  for 
which  it  exists  may  be  more  or  less  of  a  public  nature.  A  railroad  company  or  a  gas  com- 
pany is  a  private  corporation.  It  is  a  private  corporation  if  it  issues  stock.  It  is  private 
corporations  which  are  to  be  especially  treated  of  in  this  section. 

A  private  corporation,  the  business  of  which  is  of  the  nature  of  a  public  utility,  and  which  operates 
under  a  franchise  granted  by  the  public,  may  be  controlled  by  the  public  in  those  matters  affecting  the 
public's  interests.  This  has  reference  to  such  enterprises  as  railway,  telegraph,  telephone,  gas,  or  water 
companies.     Such  corporations  are  sometimes  classed  as  quasi-public. 

A  franchise  is  the  right  granted  to  a  company  by  local,  state,  or  national  authority  to  use  the  public 
streets  or  highways  for  the  purposes  of  conducting  its  business. 

Advantages 

The  advantages  of  conducting  a  business  under  corporate  management  instead  of 
individual  or  copartnership  management  may  be  enumerated  as  follows: 

1.  Stockholders  are  not  liable  individually  for  the  debts  of  the  business,  if  their  stock  is  paid  up.* 

2.  The  corporation  is  not  dissolved  by  the  death,  or  other  disability,  of  one  or  all  of  the  stockholders. 

3.  New  capital  may  be  secured  by  the  selling  (with  the  sanction  of  the  state)  of  new  stock  (usually 
preferred  stock),  thus  avoiding  the  admission  of  special  partners. 

4.  The  interest  of  one  stockholder  may  be  transferred  either  in  whole  or  in  part  to  some  one  else 
without  in  any  way  affecting  the  organization. 

5.  Money  can  be  borrowed  more  easily  by  a  corporation  than  by  a  proprietary  business  of  equal 
standing.  This  is  accomplished  by  the  sale  of  bonds.  The  advantages  of  borrowing  under  the  bond 
issue  plan  will  be  explained  later. 

6.  Exclusive  right  to  the  use  of  a  certain  name  in  a  given  state  can  be  secured. 

THE  PROCESS  OF  INCORPORATION— (ILLINOIS)  t 

Creation 

A  corporation  may  be  created  only  under  the  authority  and  by  the  power  of  the 
state.  Formerly,  each  corporation  was  created  by  a  special  enactment  of  the  legislature. 
This,  it  was  soon  discovered,  was  a  prolific  source  of  legislative  corruption  and  favorit- 
ism, and  general  statutes  were  provided  in  many  states  under  the  provisions  of  which 
corporations  could  be  formed  by  any  persons  who  would  comply  with  them  in  every  detail. 
As  corporations  increased  in  popularity,  more  and  more  of  the  states  enacted  these  gen- 
eral provisions,  until  now  any  other  manner  of  incorporation  is  forbidden  by  constitu- 
tional provision  in  all  but  seven  states. 

The  provisions  of  these  general  statutes  in  the  .different  states  vary  widely.  When, 
therefore,  it  is  sought  to  organize  a  corporation  in  a  given  state  a  copy  of  the  corporation 
statutes  of  that  state  should  be  procured  and  its  provisions  followed  closely. 

The  Illinois  state  laws  relating  to  the  incorporation  of  companies  distinguish  between  private  cor- 
porations created  for  purposes  of  profit  and  private  corporations  not  created  for  purposes  of  profit,  and 
make  special  provisions  for  each  class.  Special  provisions  are  also  made  for  cemetery  associations,  co- 
operative associations,  educational  institutions,  elevated  railroads,  foreign  corporations,  free  public  libraries, 
gas  companies,  Grand  Army  of  the  Republic,  title  guaranty  companies,  juvenile  reformatories,  pawners ' 
societies,  railroads  and  street  railroads;  and  for  the  punishment  of  persons  forming  combinations  in  restraint 
of  trade. 


♦Varies  in  different  states.  See  page  76.  Look  up  this  and  similar  references  at  the  time  your  atten- 
tion is  first  called  to  them,  as  your  attention  will  be  called  to  them  but  once. 

tin  order  to  present,  in  a  concrete  form,  some  one  definite  process  of  incorporation,  we  have  given 
on  page  7  the  exact  steps  in  this  process  for  corporations  formed  in  Illinois.  For  an  outline  of  the 
necessary  steps  in  various  states,  see  page  73. 


BOOKKEEPING  / 

Persons  desiring  to  form  a  corporation  in  Illinois  must  file  with  the  secretary  of  state  an  affidavit 
that  they  are  not  connected  with  any  trust  or  combine  the  purpose  of  which  is  to  restrain  competition  or 
trade,  to  limit  production  or  to  fix  prices.  Corporations  are  required  to  make  affidavit  to  this  effect  an- 
nually. 

Application 

Whenever  any  number  of  persons  (not  less  than  three  or  more  than  seven)*  wish 
to  form  a  corporation,  they  must  file  with^the  Secretary  of  State  a  statement  duly  acknowl- 
edged before  a  notary  public  or  other  officer  qualified  to  take  acknowledgments,  which 
statement  shall  set  forth  the  proposed  name,  location,  object,  amount  of  capital  stock 
and  number  of  shares,  the  duration  of  the  corporation  and  such  other  facts  as  may  be 
required  by  the  laws  of  the  state. 

The  License  to  Solicit  Subscription 

If  the  application  is  approved,  the  Secretary  of  State  will  issue  to  the  applicants  a 
license  as  commissioners  to  solicit  subscriptions. 

Meeting  of  Subscribers 

After  the  capital  stock  shall  have  been  fully*  subscribed  the  commissioners  must 
convene  a  meeting  of  the  stockholders  for  the  purpose  of  electing  directors.  The 
directors  then  appoint  the  officers  of  the  corporation. 

The  Certificate  of  Incorporation 

The  law  of  the  state  requires  at  least  one-half*  of  the  subscription  to  be  paid  in. 
It  may  be  paid  in  in  cash,  in  property  or  in  nominal  assets  such  as  good  will,  franchise, 
etc.*  When  the  amount  called  for  has  been  paid  in  to  the  commissioners,  they  must  make 
to  the  Secretary  of  State  a  full  report  of  all  proceedings,  accompanied  by  proofs  that  the 
provisions  of  the  state  statutes  have  been  complied  with  in  every  respect. 

This  report  must  state  what  amount  of  the  capital  stock  has  been  paid  in  in  property  other 
than  cash;  the  board  of  commissioners  appraises  the  value  of  such  property.  It  will  be  seen  from  this 
that  the  state  exercises  no  discretion  in  the  matter  of  the  values  of  such  property  items,  this  being  left 
to  the  commissioners.  Subscribers  paying  in  cash  in  order  to  protect  themselves,  should,  therefore,  make 
it  a  point  to  find  out  how  the  other  subscriptions  are  being  paid.  Subsequent  purchasers  should  observe 
the  same  precaution.  Stockholders  have  a  legal  right  to  these  facts,  and  persons  intending  to  become 
stockholders  should  insist  upon  ascertaining  the  facts  before  investing. 

These  "proofs"  consist  of  affidavits  made  in  due  form  before  a  notary  public  and  attested  by  him. 

The  various  "provisions"  above  referred  to  relate  to  such  matters  as  the  adoption  of  rules  for  the 
regulation  of  the  corporation;  presenting  a  list  of  the  names  of  incorporators,  directors  and  officers;  a  plan 
for  the  signing  and  acknowledgment  of  the  application;  advertisement  of  the  application;  proportion  of 
capital  stock  which  shall  be  subscribed  for  (100%);  rules  governing  the  amount  of  indebtedness  which 
the  corporation  is  authorized  to  incur;  method  of  filing  the  completed  certificate,  etc.  There  are  so 
many  of  these  special  regulations  that  complete  enumeration  of  them  cannot  be  attempted  in  a  work 
of  this  kind.  It  is  sufficient  to  call  attention  to  their  existence  and  to  advise  that  no  one  should 
attempt  to  form  a  corporation  without  a  very  careful  study  of  the  corporation  law  of  the  state. 

When  the  corporation  has  complied  with  the  provisions  of  the  statutes  in  every  re- 
spect, the  Secretary  of  State  will  forward  a  Certificate  of  Incorporation.*  This  is  a  formal 
document  under  the  Seal  of  the  State,  granting  the  corporation  the  power  to  conduct 
business  as  specified  in  its  application,  subject,  of  course,  to  the  general  incorporation 
law  of  the  state.      Before  the  corporation  may  commence  business,  this  certificate  must 

*Varies  in  different  states.     See  page  76. 


bookkeeping 
Certificate  of  Incorporation 


BOOKKEEPING  9 

be  filed  with  the  Recorder  of  Deeds  of  the  county  in  which  the  principal  business  of 
the  company  is  to  be  conducted. 

The  certificate  of  incorporation  is  variously  designated  in  the  different  states  as,  "Articles  of  Incor- 
poration," "Certificate  of  Organization,"  and  "Certificate  of  Incorporation."  In  many  states,  formal 
certificates  are  not  issued. 

When  corporations  are  formed  under  special  statutory  enactment,  the  formal  docu- 
ment granted  by  the  state  is  called  a  Charter. 

The  term  "charter"  has  two  meanings,  one  special,  the  other  general.  When  a  corporation  is  formed 
by  a  special  statutory  enactment  of  the  legislature  the  formal  document  prescribing  the  rights  and  powers 
of  such  corporation  is  termed  a  "charter."  When  a  corporation  is  formed  under  the  general  corporation 
law  of  the  state,  the  term  "charter"  means  the  contract  relation  between  the  state  and  the  corporation. 
In  this  case  it  is  not  a  formal  document.  The  certificate  of  incorporation  is  often  called  "the  charter," 
although,  strictly  speaking,  it  merely  evidences  the  existence  of  a  charter,  or  charter  relations. 

Before  any  general  incorporation  laws  were  enacted  formal  charters  were  issued  to  all  corporations, 
and  existing  corporations  which  were  formed  in  those  days  still  hold  their  powers  under  the  charters  then 
granted  them. 

Certificate  of  Stock  and  Stub 


The  Acme  Mahufictoring  Co. 


Fasted  to  Stock  Ltiiger  Fol.  - 


Received  thu  Certificate. 


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Stock  Certificate  No.- 


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is  entitled  to  g^-  C  a  shares  of  One  Hundred  Dollars  each,  in  the  capital  stock  of  the  Acme 
Manufacturing  Company,  fully  paid  and  non-assessable,  transferable  only  on  the  books  of  the 
Corporation  by  the  holder  hereof  in  person  or  by  attorney  upon  surrender  of  this  certificate  properly 

endorsed. 

In  VtttuBB  miprraf,  the  said  corporation  has  caused  this  certificate  to 

be  signed  by  its  duly  authorized  officers,  and  to  be  ■  seated  with  the  Sial  of 

(s*ai)  the  Corporation,  atTtZttC-e^f!^,    V^fw££  this — <g y^^^/t^  day 

of  /rZ<ts<f    A.  D.  19- 


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CAPITAL  STOCK 

Definition 

Capital  stock  is  the  amount  paid  in  or  to  be  paid  in  for  carrying  on  the  business,  and 
for  the  benefit  of  the  corporation  creditors. 

"Capital  Stock"  does  not  mean  the  same  as  "Capital."  The  capital  stock  is  fixed 
and  invariable.  The  capital  is  the  amount  of  net  assets  at  any  time,  and  may  be  greater 
or  less  than  the  capital  stock. 

Division 

Capital  stock  is  divided  into  shares,  usually  of  a  face  value  of  $100.00.  In  Illinois 
the  shares  may  vary  from  $10  to  $100.00.*  A  share  is  the  right  which  its  owner  has  in  the 
management,  profits  and  ultimate  assets  of  the  concern.     It  is  itself  an  intangible  interest 

♦Varies  in  different  states.     See  page  76. 


10  BOOKKEEPING 

resembling  a  partnership  interest,  while  the  physical  evidence  of  its  existence  is  the  stock 
certificate.  Stock  certificates  are  personalty,  not  realty;  yet  strictly  speaking  they  are 
not  personal  property,  but  are  of  the  nature  of  choses  in  action. 

Kinds  of  Stock 

(a)  Common  Stock  is  the  ordinary  stock  of  the  company.  If  a  company  issues  but  one 
kind  of  stock,  it  is  Common  Stock. 

*(b)  Preferred  Stock  is  stock  that  has  a  preference  as  to  dividends  or  as  to  assets  or 
both.  "Preferred  as  to  dividends"  means  that  if  there  are  not  enough  dividends  to  satisfy 
the  holders  of  both  the  preferred  and  common  stock,  the  holders  of  the  preferred  stock 
must  be  satisfied  first;  what  is  left  of  the  dividends  will  be  given  to  the  holders  of  common 
stock;  this  is  what  is  usually  meant  by  "Preferred  Stock."  "Preferred  as  to  assets," 
means  that  in  case  the  corporation  fails,  or  for  any  other  reason  is  dissolved,  and  it  becomes 
necessary  to  divide  the  assets,  the  holders  of  preferred  stock  will  be  satisfied  before  any 
of  the  assets  are  given  for  the  satisfaction  of  the  holders  of  common  stock. 

There  are  two  good  reasons  which  justify  the  issue  of  preferred  stock.  First:  Common  stockholders 
wishing  to  avoid  a  special  assessment  to  cover  a  loss  or  deficit,  are  willing  to  issue  preferred  stock.  The 
effect  of  the  issue  is  that  the  common  stockholders  sacrifice  their  future  profits  to  the  preferred  stock- 
holders by  unanimous  vote,  choosing  this  step  rather  than  an  immediate  cash  loss  through  assessment. 
Second:  The  holder  of  common  stock  and  the  holder  of  preferred  stock  both  understand  perfectly  well 
what  they  are  buying,  and  the  distinction  between  preferred  or  common  stock  is  borne  in  mind  when  the 
price  of  either  is  determined  upon.  Investors  would  not  buy  the  preferred  stock,  except  on  the  under- 
standing that  their  dividends  would  be  assured  them  whether  the  common  stockholders  received  anything 
or  not. 

Participating  Preferred  Stock  is  that  which  is  not  only  preferred  as  to  the  rate  of 
dividend  to  which  its  holders  are  entitled,  but  also  participates,  or  shares,  in  any  profits 
remaining  after  the  common  stockholders  have  received  a  specified  rate  of  dividend. 

Non-participating  Preferred  Stock  is  that  which  is  not  in  any  case  entitled  to  any  greater 
rate  than  the  rate  for  which  it  is  preferred.  In  a  very  prosperous  business  common  stock 
will  sometimes  receive  a  higher  dividend  than  non-participating  preferred  stock,  because 
the  non-participating  preferred  stock  is  entitled  to  dividends  up  to  only  a  certain  per  cent, 
and  the  common  stock  is  entitled  to  all  the  rest,  which  may,  in  such  a  business,  be  more 
than  that  which  was  apportioned  to  the  non-participating  preferred  stock. 

Cumulative  Preferred  Stock  is  preferred  stock  which  is  sold  under  an  agreement  that 
any  dividends  which  the  corporation  is  unable  to  pay  its  holders  up  to  the  per  cent  for 
which  it  is  preferred  will  be  made  up  if  possible  from  future  distributions  of  dividends; 
and  that  holders  of  common  stock  are  not  entitled  to  any  dividends  until  all  arrears  on 
the  cumulative  preferred  stock  are  fully  paid. 

There  may  be  several  grades  of  preferred  stock  as  follows:  First  preferred;  Second 
preferred;  etc. 

Guaranteed  Dividends  are  sometimes  offered  on  stock  in  one  corporation  which  is 
owned  and  backed  by  a  larger  corporation  amply  able  to  make  the  guaranty. 

Treasury  Stock  is  that  stock  which  is  held  by  the  company  for  future  sales.  *In  states 
requiring  that  all  of  the  capital  stock  be  subscribed  for  before  the  existence  of  the 
corporation  begins,  treasury  stock  can  exist  only  when  the  corporation  has  bought  back 
or  otherwise  acquired  some  of  its  own  stock.  (One  method  of  raising  funds  is  for  stock- 
holders to  donate  a  part  of  their  stock,  by  the  sale  of  which  additional  money  is  secured.) 

*See  page  76- 


BOOKKEEPING  1 1 

Dividends  on  treasury  stock  are  usually  returned  to  the  loss  and  gain  account  of  the  cor- 
poration. Treasury  stock  cannot  be  voted,  since  it  represents  the  interests  of  no  individual 
stockholder. 

Watered  Stock  is  that  which  is  issued  within  the  charter  limitations,  but  which  is  not 
supported  by  the  actual  value  of  the  assets  of  the  corporation. 

Spurious  or  Overissued  Stock  is  such  as  is  issued  in  excess  of  the  amount  named  in  the 
charter.     It  is  absolutely  void. 

Stock  Values 

The  amount  named  in  the  stock  certificate  is  known  as  the  nominal,  par  or  face  value- 
It  is  fixed  and  unchangeable.  The  market  value  is  what  the  stock  sells  for  in  the  market. 
This  is  determined  largely  by  its  earning  power  or  dividends.  The  real,  intrinsic  or  liquida- 
tion value  is  what  the  stock  would  be  worth  on  final  dissolution  when  all  assets  are  con- 
verted into  cash  and  all  debts  paid.  The  book  value  of  stock  is  its  value  as  ascertained 
from  the  records  of  assets  and  liabilities  as  shown  by  the  books.  Often  this  is  greater 
than  the  intrinsic  value,  as  it  is  not  always  possible  to  sell  assets  at  the  prices  at  which 
they  are  entered  in  the  books. 

The  intrinsic  value  of  one  share  is  found  by  dividing  the  total  intrinsic  value  of  the  corporation's 
stock  by  the  number  of  shares.  The  book  value  of  one  share  is  found  by  dividing  the  total  book  value 
of  all  the  shares  by  the  number  of  shares. 

Many  factors  enter  into  the  determination  of  the  selling  price  of  stock.  Primarily,  of  course,  the 
intrinsic  value  must  be  considered.  Next  in  importance  comes  earning  power,  or  dividends.  In  addi- 
tion to  these  there  are  many  conditions  that  affect  its  stability,  such  as  the  reputation  of  its  officials  for 
honesty,  public  confidence  in  the  conservatism  and  wisdom  of  its  management,  and  the  future  prospects 
of  the  corporation's  success.  Finally,  there  must  be  considered  the  influences  that  affect  the  fluctuations 
of  the  market  from  day  to  day.  Heavy  buying  on  the  part  of  influential  houses  will  cause  prices  to  rise. 
Heavy  selling  by  those  supposed  to  "know"  will  cause  prices  to  go  down.  (Fictitious  buying  and  selling 
are  sometimes  resorted  to  by  stock  market  manipulators.)  Rumors  that  some  captain  of  industry  is  in- 
terested in  a  certain  stock  will  inflate  its  price.  The  death  of  one  prominent  in  the  financial  world  will 
temporarily  depress  prices.  Rumors  of  consolidation  will  often  improve  stocks.  Rumors  of  war,  or 
financial  panic,  will  hurt  them.     And  so  on. 

Stock  Transfers 

Stock  may  be  transferred  from  one  owner  to  another  by  sale.  The  certificates  of 
the  stock  sold  must  be  endorsed  by  the  seller  over  to  the  buyer.  The  voting  power  of  the 
stock  is  transferred  with  the  ownership.  It  is  not  necessary  that  the  consent  of  other  stock- 
holders be  secured,  and  the  transfer  does  not  in  any  way  affect  the  conduct  of  the  corpora- 
tion's business. 

It  is  often  customary  for  companies  to  take  up  old  certificates  and  issue  new  ones 
in  their  place,  when  stock  is  transferred.  When  this  is  done,  a  proper  record  of  the 
transfer  of  ownership  should  be  made  on  the  books  of  the  corporation. 

A  subscriber  for  stock  who  has  not  yet  fully  paid  for  it  may  transfer  his  ownership 
of  the  stock  by  selling  it.  But  he  cannot  transfer  his  obligation  to  pay  for  the  balance 
for  which  he  has  subscribed.  The  state  granted  the  charter  on  condition  that  he  would 
pay  the  amount  for  which  he  subscribed  and  creditors  have  extended  credit  to  the  cor- 
poration upon  the  assumption  that  he  would  do  so.  He  will  be  held  for  the  full  payment 
of  his  subscription. 


12  BOOKKEEPING 

Dividends 

A  private  corporation,  like  any  other  private  business,  exists  for  the  purpose  of  earn- 
ing profits  for  the  investors.  A  part  of  the  profits  is  periodically  distributed  to  the  stock- 
holders. The  amounts  so  distributed  are  called  dividends.  Dividends  of  a  certain  rate 
per  cent  on  the  capital  stock  are  declared  by  vote  of  the  directors.  They  are  appropriated 
from  the  earnings  of  the  company.  Should  the  directors  declare  a  dividend  in  excess 
of  the  earnings  the  excess  would  have  to  be  paid  out  of  the  capital  of  the  company  and 
the  directors  would  be  held  personally  responsible  by  law  to  the  corporate  creditors  for 
the  amount  of  the  excess.  It  is  not  lawful  to  impair  the  amount  of  the  capital  of  a  cor- 
poration for  the  payment  of  dividends. 

Should  a  corporation  be  unable  to  pay  as  large  a  dividend  as  might  be  wished,  the  directors  might 
be  tempted  to  declare  a  large  dividend  anyway,  paying  it  out  of  the  capital.  This  is  against  the  law.  Such 
a  course  would  deceive  investors  and  would  cause  a  diminution  of  capital  which  would  be  unfair  to  creditors, 
for  whose  protection  the  law  has  declared  that  the  capital  shall  not  be  used  except  for  purposes  of  carry- 
ing on  the  business. 

Assessments 

When  the  books  of  a  corporation  show  a  deficit  because  of  continued  losses,  it  is  some- 
times decided  by  unanimous  vote  of  the  stockholders  that  the  deficit  shall  be  met 
by  the  assessment  of  the  stockholders  rather  than  that  the  assets  of  the  corporation  be 
allowed  to  diminish. 

Management 

The  management  of  a  corporation  is  vested  in  a  board  of  directors*  These  directors 
are  elected  by  vote  of  the  stockholders.  The  stockholders,  as  individuals,  have  no  power 
whatever  in  the  management  of  the  corporation  or  in  the  transaction  of  its  business.  The 
directors,  as  might  be  inferred  from  their  title,  direct  the  affairs  of  the  corporation,  but 
they  do  not  transact  the  business  of  the  corporation.  The  actual  business  is  transacted 
by  officers  appointed  by  the  directors  (President,  Vice-President,  Secretary,  Treasurer, 
etc.),  and  by  persons  they  may  employ. 

The  fact  that  you  are  a  holder  of  stock  of  the  Chicago  &  Alton  R.  R.  does  not  authorize  you  to  transact 
any  business  for  that  railroad.  You  have  voting  power  in  proportion  to  the  amount  of  stock  you  own, 
and  can  vote  for  the  directors  and  on  certain  questions  of  policy,  but  that  is  as  far  as  your  powers  extend. 

The  fact  that  you  are  a  director  of  the  Chicago  &  Alton  R.  R.  does  not  imply  that  you  have  any 
authority  to  sell  tickets  to  passengers.  Your  authority  as  director  is  limited  to  the  right  to  vote  on  ques- 
tions of  management  and  policy. 

The  authorized  agents  and  employes  of  the  corporation  transact  its  business.  They  may  be  removed 
at  the  instance  of  the  directors,  but  the  directors  are  not  authorized  to  transact  the  business  which  the 
employes  are  employed  to  perform.  Again,  the  stockholders  may  by  vote  remove  the  directors,  but  the 
stockholders  are  not  authorized  to  perform  the  work  of  the  directors. 

Voting 

Shareholders  vote  upon  who  shall  be  the  directors  of  the  corporation;  whether  new 
stock  or  bonds  shall  be  issued  and  sold;  and  on  matters  relating  to  the  existence  of 
the  corporation,  to  the  widening  of  its  scope  of  operations,  to  the  increase  of  its  assets,  or 
to  its  dissolution.  A  shareholder  may  cast  as  many  votes  as  the  number  of  shares  which 
he  holds.     When  a  person  or  group  of  persons  own  more  than  one-half  of  the  voting  power 

♦For  No.  of  directors  see  page  77. 


BOOKKEEPING  13 

of  the  corporation,  they  are  said  to  own  a  "controlling  interest"  in  the  corporation,  since 
they  can,  by  their  votes,  control  its  acts  and  policies. 

Cumulative  Voting  is  the  plan  of  voting  which  enables  the  holder  of  stock  to  protect  his  own  interests 
by  casting  all  of  his  votes  for  one  director.  It  enables  the  minority  stockholders  to  elect  one  director 
who  will  safeguard  their  interests.  Illustration:  A  is  the  holder  of  40  shares  of  stock  in  a  corporation 
which  is  voting  upon  the  election  of  three  directors.  B  and  C,  the  other  members  of  the  corporation, 
together  own  60  shares.  Under  the  ordinary  plan  of  voting,  B  and  C  could  elect  the  entire  directorate. 
Under  the  cumulative  plan  of  voting,  A  may  cast  his  40  votes  three  times  for  one  director,  instead  of  once 
for  each  of  three  directors.  This  gives  him  a  total  voting  power  of  120  votes  with  which  he  can  elect  one 
director.  B  and  C,  who  own  60  shares,  have  a  total  voting  power  of  180  votes  with  which  they  can  elect 
two  of  the  directors.  If  A  had  been  compelled  to  cast  his  votes  separately  for  three  directors,  casting  only 
40  votes  for  each  director,  B  and  C  would  thereupon  have  cast  60  votes  for  each  director;  and  thus  B  and  C 
would  have  elected  the  entire  directorate. 

The  directors  vote  as  individuals,  each  director  being  entitled  to  one  vote.  The 
President  and  other  officers,  as  such,  have  no  voting  power.  It  frequently  happens, 
however,  that  the  officers  are  also  directors;  they  then  have  the  right  to  vote  as  directors. 

Powers  of  Stockholders 

Individually,  stockholders  are  entitled  to  vote  at  their  meetings,  to  share  in  the  cor- 
poration profits,  and  to  share  in  the  corporate  assets  in  case  of  dissolution.  They  may 
examine  the  books  of  the  company  at  any  reasonable  time.  They  may  pledge  their  stock 
as  security  for  their  personal  debts,  and  still  retain  the  right  to  vote  the  stock,  and  to 
share  in  its  dividends. 

In  Illinois,  stockholders  have  the  right  to  vote  by  the  cumulative  plan.*  They  may  cast  their  votes 
by  proxy  if  they  wish.* 

Collectively,  the  stockholders  elect  the  directorate  and  vote  upon  matters  of  corporate 
policy  as  enumerated  in  the  paragraph  on  Voting. 

In  Illinois,  a  majority  of  the  stockholders  may  remove  directors  for  cause,  or  may  change  the 
number  of  directors.  Two-thirds  of  the  stockholders  may  call  a  meeting  at  any  time.  They  may 
dissolve  the  corporation. 

Liability  of  Stockholders 

As  has  been  previously  stated,  stockholders  in  a  corporation  are  not  liable  personally 
for  the  debts  of  the  corporation.  Should  the  corporation  fail,  they  may  lose  the  amount 
they  have  invested,  but  in  most  states  they  are  not  liable  further.  Some  states,  however, 
have  enacted  provisions  making  members  of  a  corporation  liable  to  creditors  to  an  amount 
in  addition  to  their  investment,  which  amount  varies  in  the  different  states*  Under  the 
National  Banking  Act,  a  stockholder  in  a  National  Bank  is  held  liable  to  creditors  to  an 
additional  amount  equal  to  the  par  value  of  his  capital  stock. 

A  stockholder  is  always  liable  to  creditors  for  the  amount  of  his  unpaid  subscription. 
Agreements  among  stockholders  that  the  entire  amount  of  subscriptions  need  not  be  paid  in, 
are  binding  among  themselves,  but  are  of  no  effect  as  against  creditors  when  the  working 
capital  of  the  corporation  is  exhausted  and  creditors  demand  payment.  Stock  not  fully 
paid  up  may  be  transferred  to  another,  but  the  obligation  of  the  original  subscriber  to 
pay  his  balance  is  not  canceled  thereby  Even  the  dissolution  of  the  corporation  will  not 
relieve  the  subscriber  from  liability  to  creditors  on  his  unpaid  subscription. 
*See  page  76. 


14  BOOKKEEPING 

Duties  of  Directors 

They  appoint  the  officers  and  agents  of  the  company  and  have  authority  in  matters 
relating  to  the  management.  In  many  states  they  make  the  by-laws;  i.  e.,  rules  for 
internal  government  of  the  company.  Important  contracts,  such  as  the  borrowing  of 
money,  should  be  authorized  by  the  directors.  The  directors  act  as  a  body;  a  director  has 
no  individual  authority. 

In  Illinois  the  directors  may  levy  assessments  for  installments  on  stock.  They  may  hold  meetings 
outside  of  the  state  provided  the  action  of  such  meeting  be  ratified  by  a  later  meeting  held  within  the 
state. 

Powers  of  the  Corporation 

Corporate  powers  are  of  two  kinds:  (1)  Powers  incidental  to  corporate  existence, 
arising  from  the  very  nature  of  a  corporation.     (2)  Charter  powers. 

(1)  Incidental  powers  may  be  briefly  outlined  thus: 

The  endowed  power  of  succession. 
The  right  to  maintain  and  defend  suits  at  law. 

The  right  to  hold  property,  except  that  a  corporation  may  not  hold  real  estate  not  necessary  to  its 
existence  and  the  transaction  of  its  business.* 

The  right  to  the  exclusive  use  of  a  certain  name  in  a  given  state. 
The  right  to  have  a  common  seal. 

The  right  to  make  by-laws,  i.  e.,  rules  for  internal  management. 
The  right  to  remove  officers  and  even  members,  for  just  cause. 

(2)  Charter  powers. 

Since  the  charter  includes  the  powers  applied  for  and  the  whole  law  of  the  state, 
charter  powers  are:  (a)  Those  powers  which  are  specifically  enumerated  in  the  Com- 
pany's application,     (b)  Those  specifically  granted  by  the  statute. 

A  person  may,  as  a  general  rule,  do  anything  not  specifically  forbidden  by  law.  A 
corporation  may  do  only  what  is  granted  by  law.  Powers  need  not,  however,  be  expressly 
granted;  they  may  be  implied.  Illustration:  The  power  to  issue  negotiable  paper  or 
bonds,  and  the  power  to  pledge  corporation  property,  are  implied  when  the  statute  ex- 
pressly grants  the  power  to  borrow  money,  because  money  cannot  be  borrowed  unless 
one  of  these  things  be  done. 

The  power  to  transact  the  business  specified  in  the  application  for  the  charter 
usually  carries  with  it  the  following  implied  corporate  powers: 

To  borrow  money. 

To  issue  commercial  paper  or  bonds. 

To  become  surety  or  guarantor  in  the  usual  course  of  business,  but  not  to  issue  accommodation  paper, 
or  to  assume  other  obligations  not  arising  from  the  transaction  of  its  business. 

To  loan  money. 

To  acquire  and  enforce  a  lien  upon  its  own  stock*or  stock  of  other  corporations  when  such  stock  is 
held  by  a  debtor,  but  not  (generally)  to  take  stock  in  other  corporations  as  an  investment.*  To  hold  its 
own  stock  as  treasury  stock  (except  when  this  privilege  is  expressly  denied  by  statute). 

Following  is  a  list  of  important  powers  often  granted  by  state  statute: 

To  accept  property,  services  or  intangible  assets  in  lieu  of  cash  in  payment  for  stock.* 
To  collect  from  subscribers  in  installments. 

To  declare  stock  forfeited  for  non-payment  of  installments  and  to  sell  such  stock  in  satisfaction  of 
the  company's  claim.* 

♦See  page  76. 


BOOKKEEPING  15 

To  classify  directors  as  to  time  of  expiration  of  office.* 

To  consolidate  with  other  corporations,  if  not  competitive.* 

To  extend  its  corporate  existence. 

To  change  its  corporate  name. 

To  increase  or  decrease  its  capital  stock. 

To  dissolve  without  recourse  to  the  courts. 

To  retain  a  part  of  its  original  capital  stock  as  treasury  stock. 

To  purchase  its  own  capital  stock.* 

To  purchase  stock  in  other  corporations  and  hold  the  same  as  an  investment. 

To  issue  preferred  stock. 

In  studying  the  foregoing  enumerated  powers,  two  things  must  be  borne  clearly  in 
mind: 

(1)  That  the  exercise  of  any  of  the  powers  above  enumerated  may  be  prohibited  or 
restricted  by  statute  in  any  State,  and  that  generally  (in  the  case  of  statutory  powers) 
the  failure  of  the  statute  to  specifically  grant  the  power  constitutes  a  prohibition. 

(2)  That  a  corporation  may  not  transact  any  business  except  that  for  which  per- 
mission is  given  in  its  charter. 


CORPORATION  ACCOUNTING 


Corporate  Records 
(a)     Stock  Records 


1  Subscription  Book. 

2  Stock  Certificate  Book  stub. 

3  Stock  Ledger. 

4  Installment  Receipt  Book  stub. 

5  Installment  Ledger 
(b)    Official  Record Minute  Book. 


(c)  Operation  or  Business  Records  Including  books  of  original  and  subsequent  entry  necessary 

for  recording  the  transactions  of  the  business. 

(d)  Profit  Distribution  Records. 

The  members  of  the  corporation  sustain  a  different  relation  to  the  corporation  itself 
than  do  partners  to  their  business.  The  distinctive  feature  of  corporation  accounting  is  its 
manner  of  keeping  the  records  to  express  this  relation.  The  ordinary  business  of  a  cor- 
poration is  recorded  in  the  same  way  that  the  business  of  any  partnership  or  proprietorship 
is  recorded. 

Corporation  accounting  differs  from  other  accounting  in  the  records  for  organization, 
and  the  plan  for  the  distribution  of  profits.  If  a  partnership  or  proprietorship  be  changed 
to  a  corporation  it  is  not  necessary  to  make  any  change  in  the  books  of  accounts  so  far  as 
they  express  the  relation  of  the  business  to  its  debtors  and  creditors,  but  it  is  only  necessary 
to  make  such  changes  as  are  necessary  to  show  the  interests  of  those  who  are  associated 
together  in  the  business,  and  the  plan  for  distributing  the  profits. 

(a)  Stock  Records: 

The  stock  records  of  a  corporation  are  those  in  which  account  is  kept  of  the  stock- 
holders' interests,  and  the  transfers  thereof  as  they  may  occur.     These  consist  of: 

1.  Subscription  Book  or  List,  in  which  are  shown  the  names  of  subscribers  and  the 
amounts  of  their  subscriptions. 

2.  Stock  Certificate  Book  Stub.  As  the  certificates  of  stock  are  issued,  records 
are  made  on  the  stubs  from  which  the  certificates  are  detached.  These  records  are 
posted  to  the  Stock  Ledger. 

*See  page  76. 


16  BOOKKEEPING 

3.  Stock  Ledger,  showing  each  member's  holdings  of  fully  paid  stock,  for  which  certifi- 
cates have  been  issued. 

4.  Installment  Receipt  Book  stub.  As  receipts  are  issued  for  part  payments  on 
stock,  records  are  made  on  the  stubs.     These  are  posted  to  the  Installment  Ledger. 

5.  Installment  Ledger,  containing  each  member's  account  with  the  corporation  for 
stock  subscribed  for  by  him. 

(b)  Official  Records: 

The  official  records  are  kept  in  the  Minute  Book.  This  book  should  contain  an  orderly 
record  of  the  business  transacted  at  all  meetings  of  directors  as  well  as  at  all  meetings  of 
stockholders.  To  keep  the  Minute  Book  properly  is  a  work  of  great  importance,  and 
what  is  written  in  this  book  should  be  written  by  one  who  is  familiar  with  the  laws  gov- 
erning corporations.     Minutes  of  important  meetings  should  be  approved  by  an  attorney. 

(c)  Operating  or  Business  Records: 

As  has  been  previously  stated,  these  records  would  not  necessarily  differ  in  the  books 
of  a  corporation  from  records  of  the  same  kind  in  any  other  business.  No  attention  will 
be  devoted  to  them  at  this  point. 

OPENING  ENTRIES 

The  Capital  Stock  account  in  the  General  Ledger  of  a  corporation  corresponds  to  the 
investment  account  of  a  proprietary  business,  since  it  represents  the  total  of  the  interests 
of  all  investors.  (Bondholders  are  investors,  in  a  sense,  yet  the  relation  of  the  bondholders 
to  the  corporation  is  not,  strictly  speaking,  that  of  investors,  but  of  creditors.)  In  open- 
ing a  set  of  corporation  books  it  is  .therefore  necessary  to  credit  the  capital  stock  account 
for  the  total  amount  of  stock  authorized.  The  capital  stock  account  is  a  controlling 
account,  the  amount  shown  therein  being  at  all  times  equal  to  the  aggregate  of  the  stock 
issued  to  the  various  stockholders,  plus  that  reserved  as  treasury  stock  in  the  hands  of  the 
Treasurer  as  trustee. 

We  will  consider  the  opening  entries  for  five  different  conditions: 
Condition  1.     Capital  stock  all  paid  in  in  cash,  $100,000.     This  is   the   simplest 
transaction  possible. 

Cash,  $100,000 

Capital  Stock,  $100,000. 

In  the  stock  ledger  open  an  account  with  each  stockholder  and  credit  him  for  the  par 
value  of  his  stock. 

Condition  2.  Capital  stock,  $100,000,  all  subscribed  for  but  only  $50,000  paid 
in  in  cash,  the  balance  to  be  paid  on  call  of  the  directors.  In  this  case  the  installment 
ledger  is  generally  used. 

(a)  Subscription,  $100,000. 

Capital  Stock,  $100,000. 

Explanatory:     Use  the  facts  of  the  subscription  list  as  an  explanation,  showing  subscribers* 
names  and  amounts  subscribed  for. 

(b)  Debit  each  subscriber  in  the  Installment  Ledger  for  amount  of  his  subscription.  By  this  method 
the  Subscription  Account  opened  in  the  General  Ledger  is  in  the  nature  of  a  Controlling  Account,  as  the 
aggregate  of  the  Installment  Ledger  should  always  agree  with  it. 

(c)  As  each  subscriber  pays,  Cash  is  debited  and  Subscription  credited  in  the  General  Ledger.  The 
subscribers  will  be  credited  individually  in  the  Installment  Ledger. 


BOOKKEEPING  17 

Should  the  subscriptions  not  be  sufficiently  numerous  to  warrant  a  separate  Install- 
ment Ledger,  the  subscription  account  in  the  general  ledger  should  be  kept  in  this  way: 
On  the  debit  side  enter  the  names  of  the  subscribers,  allotting  each  one  as  many  lines  as 
the  number  of  installments  he  is  expected  to  pay.  As  the  installments  are  paid  in,  debit 
Cash  and  credit  Subscription,  entering  the  individual  credits  in  the  subscription  account 
opposite  the  name  of  the  subscriber  making  the  payment.  In  this  way,  the  subscription 
account  will  exhibit  a  general  result,  and  in  addition  it  will  be  possible  to  determine  from 
it  the  condition  of  the  account  of  each  subscriber. 

Condition  3.  Capital  stock  not  fully  subscribed  for  and  the  subscription  not  fully 
paid  in  in  cash.  Illustration:  In  this  case  let  us  assume  the  capital  stock  to  be  $100,000. 
$80,000  is  subscribed  for.  $20,000  is  held  as  treasury  stock  for  future  subscription. 
Of  the  part  subscribed  for,  $40,000  is  paid  in  in  cash  and  balance  subject  to  call. 

Two  entries  are  necessary: 


(1) 

Subscription, 

$80,000 

Treasury  Stock, 

$20,000 

Capital  Stock, 

(2) 

Cash, 

Subscription, 

$40,000 

$100,000. 
$40,000. 

In  states  where  the  law  requires  that  all  stock  be  subscribed  for  before  a  charter  will 
be  issued,  there  would  be  no  occasion  for  making  these  entries. 

.  Condition  4.  Changing  from  a  partnership  to  a  corporation.  When  the  capital 
stock  of  the  organization  is  to  be  the  same  as  the  total  of  the  interests  of  the  proprietors,  it 
is  only  necessary  to  open  a  capital  stock  account  and  close  the  proprietors'  accounts  into 
it.  This  will  leave  the  books  in  balance.  The  proprietors'  interests  should  then  be  sepa- 
rately shown  in  a  stock  ledger. 

However,  it  is  not  at  all  uncommon  in  changing  from  a  partnership  to  a  corporation 
to  organize  for  more  than  the  total  of  the  partnership  interests.  In  such  cases  the  balance 
of  the  books  would  have  to  be  maintained  by  the  creation  of  special  accounts  such  as  good 
will,  copyright,  patent  right,  etc.,  which  would  be  debited  for  enough  to  make  up  the  differ- 
ence and  keep  the  books  in  balance. 

It  must  not  be  inferred  that  corporations  should  arbitrarily  create  accounts  with  these  intangible 
assets  (good  will,  patent  right,  copyright,  etc.)  and  record  them  at  any  value  they  wish.  Such  an  asset 
should  be  entered  on  the  books  at  its  actual  worth,  and  of  course  should  not  be  entered  at  all  if  it  does 
not  exist.     Stock  is  "watered"  by  the  unfair  use  of  these  accounts. 

Illustration:  If  a  partnership  in  which  the  interests  of  the  proprietors  should  aggregate 
$30,000  should  capitalize  for  $50,000,  the  difference  of  $20,000  would  represent  the  nom- 
inal assets  such  as  good  will,  etc.  Accounts  should  be  opened  with  good  will,  etc.,  and 
debited  in  the  aggregate  $20,000.  The  proprietors'  interests  in  the  $50,000  of  capital 
stock  would  bear  the  same  proportion  to  each  other  as  their  investment  accounts  had 
borne  to  each  other  before  the  change  from  a  partnership  to  a  corporation  was  effected. 

The  business  of  the  corporation  can  be  kept  in  the  same  books  that  were  used  by  the 
partnership,  or  the  accounts  can  be  transferred  from  the  old  books  to  an  entirely  new  set 
of  books 

Condition  5.  J.  R.  Conway  has  invented  an  Adding  Machine  and  had  it  patented. 
He  does  not  have  the  funds  to  begin  the  manufacture  and  sale  thereof.     A  corporation 


18  BOOKKEEPING 

is  organized  with  a  capital  stock  of  $200,000.00.     The  services  of  a  promoter  are  engaged, 
and  Fred  H.  Barnes,  E.  G.  Howard  and  J.  C.  Williams,  capitalists,  are  interested  in  the 
venture.    The  stock  is  issued  at  a  par  value  of  $100.00  per  share  as  follows: 
J.  R.  Conway,  850  shares,  paid  for  in  full  by  his  Patent  Right,  valued  at  $85,000.00: 

D.  B.  Decker,  promoter,  100  shares  in  full  of  his  services. 

Fred  H.  Barnes,  500  shares,  to  be  paid  for  by  real  estate  valued  at  $50,000.00,  to  be  deeded  to  the 
company  and  used  as  a  factory  site. 

E.  G.  Howard,  400  shares,  to  be  paid  for  in  Sundry  Machinery  and  Tools  from  his  own  factory,  which 
he  has  decided  to  abandon.     Property  value,  $17,850.00.     The  balance  he  pays  in  cash. 

J.  C.  Williams,  150  shares,  paid  for  in  cash  less  a  stock  discount  of  5%:     What  entry? 
Patent  Right  $85,000.00 

Promotion  Expense,  10,000 .  00 

Real  Estate,  50,000.00 

Machinery  and  Tools,  17,850 .  00 

p    .     j  E.  G.  Howard,  $22,150.00  1 

U.C.Williams,    14,250.00  J  36,400.00 

Stock  Discount,  750.00 

Capital  Stock,  $200,000 .  00 

Promotion  Expense.  It  is  customary  to  engage  promoters  in  new  ventures,  because  of  their  connec- 
tion with  capitalists  who  are  seeking  investments.  For  his  services,  the  promoter  is  generally  paid  in  cash 
or  in  stock  of  the  new  company  or  both.  His  services  are  an  expense  to  the  business,  and  should  be  charged 
to  "Promotion  Expense."  This  account  stands  as  an  asset,  although  a  very  doubtful  one.  It  should 
gradually  be  written  off  into  Loss  &  Gain  until  wiped  off  the  books. 

Stock  Discount.  This  is  an  allowance  which  is  binding  between  the  company  and  the  stockholder, 
but  should  a  creditor  attack  the  corporation  and  the  firm  assets  be  insufficient  to  pay  its  debts,  the  stock- 
holder could  be  compelled  to  pay  the  balance  due  on  the  par  value  of  his  stock.  Too  much  emphasis  cannot 
be  laid  upon  the  necessity  for  caution  in  the  matter  of  buying  subscription  stock  that  is  not  fully  paid 
up.  The  buyer  incurs  a  liability  for  the  payment  of  the  balance.  Such  stock  is  not  cheap,  even  if 
given  to  the  subscriber.  In  case  of  the  failure  of  the  corporation,  it  may  eventually  cost  him  full  par 
value,  for  he  may  be  held  by  creditors  for  the  full  amount  of  the  unpaid  balance. 

EXERCISES 
Journalize 

Jan.  1,  19 — .  The  National  Adding  Machine  Co.  has  incorporated  with  a  capital 
stock  of  $70,000.00,  all  paid  in  in  cash. 

Feb.  1,  19 — .  J.  C.  Walker,  patentee  of  a  wheel  brake  for  wagons,  has  organized  the 
Walker  Wheel  Brake  Company,  a  corporation  for  manufacturing  and  selling  the  device. 
The  total  capital  stock  of  the  company  is  $200,000.00,  of  which  Mr.  Walker  is  allowed 
75  shares  of  $100.00  each,  as  fully  paid  up,  for  his  patent.  The  rest  of  the  capital  stock 
is  paid  in  in  cash. 

March  1,  19—.  The  $100,000.00  capital  stock  of  the  Wheeling  Coal  Mining  Co.  is 
all  subscribed  for,  but  only  65%  is  paid  in,  the  balance  being  payable  upon  call  of  the 
directors.  Of  the  amount  paid  in,  $50,000  was  paid  in  cash  by  subscribers  A,  B,  C,  and  D; 
$10,000.00  was  given  by  the  company  to  E.  G.  White,  owner  of  the  land,  for  a  ten-year 
lease  on  the  land;  and  $5,000.00  was  given  to  H.  A.  Swigart  for  promotion  services. 

♦Apr.  1,  19 — .  A  corporation  has  been  organized  under  the  name  "The  Burwick  Soap 
Co.,"  capitalized  at  $150,000.00.  Two-thirds  of  the  capital  stock  has  been  subscribed 
for.  $80,000.00  has  been  paid  in,  as  follows,  the  balance  being  payable  on  call:  Cash 
from  stockholders  A,  B,  C,  and  D,  $50,000.00.  Real  estate,  from  A.  G.  Sedgwick, 
$10,000.00.  Mdse  and  good  will,  from  G.  H.  Bronson,  $8,000.00  and  $7,000.00, 
respectively.     Promotion  services  of  Benj.  H.  Waters,  $5,000.00. 

*This  problem  not  applicable  to  an  Illinois  corporation. 


BOOKKEEPING  19 

*May  1,  19 — .  The  Metallic  Motor  Co.,  Inc.,  has  been  organized  with  a  capital  stock 
of  $90,000.00.     80%  of  this  has  been  subscribed,  half  paid  in,  balance  payable  on  call. 

June  1,  19 — .  A  call  has  been  issued  by  the  directors  for  half  of  the  unpaid  balances 
on  subscriptions  to  the  stock  of  the  Metallic  Motor  Co.,  Inc.  All  of  this  is  paid  in  in  cash, 
except  $5,000.00,  which  amount  was  paid  in  by  one  of  the  stockholders  in  U.  S.  2%  Gold 
Bonds  of  1913. 

July  1,  19—.  A.  C.  Brink  owns  a  factory  site  worth  $10,000.00.  C.  E.  Gailey  owns 
a  patent  right  worth  $12,000.00.  F.  W.  Schramm  owns  machinery  worth  $10,000.00. 
H.  H.  Harris  agrees  to  promote  the  organization  of  a  $100,000.00  corporation  for  the 
purpose  of  manufacturing  Mr.  Gailey's  patented  article,  and  to  devote  two  years  of  his 
time  to  the  purpose  in  exchange  for  $10,000.00  stock  in  the  company.  Mr.  Brink,  Mr. 
Gailey,  and  Mr.  Schramm  are  to  invest  the  real  estate,  patent  right  and  machinery  above 
mentioned,  receiving  stock  in  equal  exchange  therefor.  The  rest  of  the  $100,000.00  is 
raised  by  subscription,  80%  of  which  is  to  be  in  cash,  the  balance  upon  call. 

Aug.  1,  19 — .  Smith,  Cole  and  Johnson  are  partners  whose  respective  invest- 
ments are  $10,000.00,  $9,000.00,  and  $6,000.00.  They  decide  to  incorporate.  They 
estimate  the  value  of  the  good  will  of  the  business  at  $10,000.00,  which  is  added  to  their 
investment  in  determining  the  amount  of  capital  stock.  Smith,  Cole  and  Johnson  divided 
the  capital  stock  in  the  same  proportion  as  their  original  investments. 

Sept.  1,  19 — .  During  August  the  books  of  the  new  corporation  exhibited  a  profit 
of  $300.00,  and  Smith,  who  wishes  to  unload  his  stock,  finds  a  buyer  whom  he  convinces 
that  the  company  can  be  relied  upon  to  make  a  minimum  net  profit  of  $3,500.00  per  year, 
or  10%  on  its  capital.  The  buyer  wishes  his  money  to  return  him  7%  per  annum,  and 
purchases  Mr.  Smith's  stock  at  a  price  determined  by  his  desire  to  make  7%,  and  his 
belief  that  the  company's  profit  will  be  $3,500.00  a  year.  What  does  the  buyer  pay  Mr. 
Smith?  How  much  does  this  exceed  Mr.  Smith's  original  investment  as  shown  by  the 
partnership  books  before  incorporation? 

ACCOUNTS  SHOWING  DISTRIBUTION  OP  THE  PROFITS 

The  plan  of  distribution  of  the  profits  of  a  corporation  requires  the  presence  in  the 
ledger  of  certain  accounts  not  kept  in  a  proprietary  business. 

The  Undivided  Profits  Account 

The  profits  of  the  business  instead  of  being  carried  directly  to  a  proprietor's  account 
or  accounts  are  transferred  to  an  Undivided  Profits  account.  The  profits  which  appear 
in  the  undivided  profits  account  are  distributed  into  the  various  fund  and  reserve  accounts, 
and  the  Dividend  account.  The  amount  carried  to  the  dividend  account  depends,  of 
course,  on  how  much  is  left  after  the  fund  and  reserve  accounts  have  been  cared  for. 

The  Dividend  Account 

When  dividends  are  declared  the  total  amount  of  the  appropriation  for  this  purpose 
is  transferred  to  the  credit  of  the  dividend  account  by  a  proper  closing  entry,  or  by  a 
journal  entry.  This  amount  remains  on  the  credit  side  of  the  dividend  account,  until  paid 
out  in  cash  to  the  shareholders.  When  paid  out  in  cash,  the  cash  account  is  credited  and  the 
dividend  account  is  debited.  Sometimes  dividends  are  declared  which  are  not  to  be  paid 
until  some  future  date.     In  this  case,  the  dividend  account  exhibits  a  balance  of  the 

♦This  problem  not  applicable  to  an  Illinois  corporation. 


20  BOOKKEEPING 

amount  of  dividends  declared,  but  not  paid.  In  such  a  case,  dividend  warrants  might 
be  issued  to  the  stockholders  who  would  hold  them  as  evidences  of  debt  until  time  for 
their  redemption. 

ISSUING  BONDS 

A  corporation  in  need  of  money  may  secure  it  by  issuing  bonds.  A  bond  is  the  cor- 
poration's promise  to  pay.  It  corresponds  to  the  promissory  note  of  an  individual,  except 
that  it  is  more  formal,  and  is  under  seal.  The  following  comparison  of  individual  and 
corporation  obligations  will  shed  some  light  on  the  nature  of  a  bond: 

Individual  Obligations.  Corporate  Obligations. 

Unsecured  Note.      --------  Debenture  Bond. 

Principal  Note  Secured  by  Mortgage.    -    -  Mortgage  Bond. 

Collateral  Note.  ---------  Collateral  Trust  Note. 

The  title  of  a  bond  may  indicate  the  purpose  for  which  it  has  been  issued,  the  man- 
ner of  its  redemption,  the  time  of  its  maturity,  the  name  of  the  corporation  issuing  it; 
or  it  may  indicate  any  or  all  of  these  things.  "U.  S.  2%  Gold  Bonds,  1914,"  is  a  proper 
designation  for  a  bond  issued  by  the  government,  bearing  2%  interest,  maturing  in  1914, 
and  payable  in  gold.  "Municipal  Bonds"  are  bonds  issued  by  cities  and  other 
municipal  corporations.  In  one  instance  bonds  issued  to  raise  money  for  building  a 
bridge  were  named  "City  Bridge  Bonds." 

Debenture  Bonds  are  unsecured  bonds,  and  correspond  to  the  unsecured  promissory 
note  of  an  individual. 

Mortgage  Bonds  are  those  secured  by  a  mortgage  on  the  corporation's  property. 
"First  Mortgage  Bonds,"  "Second  Mortgage  Bonds,"  "General  Mortgage  Bonds,"  etc., 
are  bonds  of  this  kind. 

Money  may  be  more  readily  secured  by  the  sale  of  corporation  bonds  than  by  the 
negotiation  of  a  loan  by  an  individual  or  firm.  It  is  easier  to  float  a  bond  issue  of  $20,000.00 
divided  into  separate  bonds  of  $500.00  each,  than  to  find  one  individual  or  syndicate  which 
will  loan  $20,000  00  in  a  lump  sum.  Bonds  and  promissory  notes  are  alike  in  that 
both  are  usually  secured  by  the  property  of  the  borrower. 

When  a  corporation  issues  bonds,  a  bond  account  should  be  opened  on  the  books 
under  a  title  which  sufficiently  describes  it,  as  "First  Mortgage  Bonds,"  "Bonds  of  1920," 
etc,     When  the  bonds  are  disposed  of  for  cash,  the  journal  entry  is: 

Dr.  Cash, 

Cr.  The  bond  account  (under  proper  title). 

If  the  bond  be  sold  at  a  discount  and  a  commission  be  paid  an  agent  for  selling,  the 
entry  is: 

Dr.  Cash. 

Dr.  Bond  Brokerage. 

Dr.  Bond  Discount. 

Cr.  The  bond  account  (under  proper  title). 

The  bond  account  is  a  liability  account  the  same  as  the  Bills  Payable  account,  since 
both  represent  amounts  due. 


BOOKKEEPING 
COUPON    BOND 


21 


The  coupons,  which  are  shown  in  the  above  illustration  as  attached  to  the  right  edge  of  the  bond, 
may  be  attached  to  the  bottom  of  the  bond  or,  when  there  are  many,  may  constitute  a  full  page  which 
is  attached  to  the  bond.  Each  coupon  is  a  note  for  a  half  year's  interest  and  each  bears  a  different 
date.  As  each  interest  payment  falls  due,  a  coupon  is  detached  and  exchanged  for  cash.  Study  the 
form  carefully. 


22  BOOKKEEPING 

The  Bond  Sinking  Fund 

A  bond  issue  constitutes  a  debt  owed  by  the  corporation.  The  lenders  (bondholders), 
naturally  wish  to  be  assured  that  the  debt  will  be  paid  at  the  time  agreed  upon,  i.  e.,  the 
time  of  maturity  of  the  bonds.  Therefore,  it  is  usually  made  one  of  the  provisions  of  the 
bond  that  the  corporation  binds  itself  to  create  a  sinking  fund  and  periodically  to  place 
therein  amounts  which  will  in  time  redeem  the  bonds.  A  sinking  fund  usually,  therefore, 
not  only  provides  for  the  redemption  of  bonds  at  maturity,  but  operates  as  a  guaranty 
to  bondholders  that  the  bonds  will  be  paid. 

Sinking  Funds  may  be  treated  in  either  of  two  ways: 

1.  When  the  corporation  has  bound  itself,  as  explained  above,  to  set  aside  a  part 
of  its  profits  for  the  purpose  of  redeeming  the  bonds,  specific  assets,  usually  cash,  should 
be  definitely  reserved.     If  the  asset  so  set  aside  consists  of  cash,  the  proper  journal  entry  is: 

Dr.  Sinking  Fund  Assets. 
Cr.  Cash. 

2.  When  the  sinking  fund  is  created  for  the  purpose  of  meeting  a  future  obligation, 
but  there  exists  no  agreement  to  set  aside  specific  assets,  the  corporation  may  elect  to 
create  a  merely  nominal  reserve  out  of  its  profits.     The  proper  entry  for  this  would  be: 

Dr.  Undivided  Profits. 

Cr.  Sinking  Fund  Reserve. 

This  plan  would  permit  the  assets  to  remain  in  the  business  as  a  part  of  its  working  capital,  instead 
of  being  actually  set  aside  where  they  could  not  be  touched.  The  sinking  fund  reserve  so  created  would 
be  an  auxiliary  account,  subordinate  to  the  Undivided  Profits  account.  It  would  contain  a  part  of  the 
profits,  which  part  has  been  taken  out  of  the  Undivided  Profits  account  as  a  precaution,  to  prevent  its 
distribution  as  dividends. 
ILLUSTRATIONS    OF    JOURNAL    ENTRIES 

Condition  1.  The  Western  Manufacturing  Company  is  financially  embarrassed.  A 
meeting  of  stockholders  has  been  held,  and  it  has  been  decided  to  issue  and  market  pre- 
ferred stock  to  raise  funds.  The  stockholders  are  agreed,  and  legal  permission  having 
been  obtained,  2,000  shares  are  issued  at  $100  each,  and  sold  in  the  open  market  for  cash. 

Entry: 

Dr.  Cash. 

Cr.  Capital  Stock  Preferred. 

In  case  of  both  common  and  preferred  stocks,  separate  Capital  Stock  Accounts  should 
be  kept  in  the  General  Ledger,  as  well  as  separate  stock  ledgers.  Each  stock  ledger  will 
prove  with  its  own  account. 

Condition  2.  Suppose  some  of  the  larger  stockholders  at  the  above  meeting  had 
decided  to  donate  1,000  shares  of  their  stock  to  the  company  for  future  sale,  to  raise 
the  much-needed  funds.     The  entries  would  be: 


In  Journal: 


In  Stock  Ledger; 


Dr.  Treasury  Stock. 

Cr.  Undivided  Profits. 


Dr.  Donors. 

Cr.  John  Smith,  Treasurer  (as  trustee). 


BOOKKEEPING  23 

Condition  3.  Suppose  that  the  company  had  decided  by  a  unanimous  vote  to 
raise  the  funds  by  assessment.     The  following  entry  would  be  made. 

Dr.  Assessment  No.  1. 

Cr.  Undivided  Profits  (or  other  suitable  account). 
On  the  debit  side  of  the  assessment  account  post  the  names  of  stockholders  and  amount  due  from 
each.     When  they  pay,  credit  Assessment  account  opposite  proper  debit. 

Condition  4.  Suppose  that  the  company  had  decided  to  issue  First  Mortgage 
Bonds  to  raise  the  money,  and  sell  them  to  the  public. 

No  entry  would  be  made,  except  as  the  bonds  are  sold;  then: 

Dr.  Cash. 

Cr.  First  Mortgage  Bonds. 

Condition  5.  If  the  company  had  decided  to  establish  a  Sinking  Fund  to  meet 
these  bonds  at  maturity  and  to  make  deposits  with  trustees  at  regular  intervals  for  such 
purpose,  the  following  entry  would  be  made  as  each  cash  deposit  is  made  with  the  trustees*. 

Dr.  Sinking  Fund  Assets. 
Cr.  Cash. 

Condition  6.  When  the  company  creates  a  reserve  for  the  above  sinking  fund, 
the  following  entry  is  made. 

Dr.  Undivided  Profits. 

Cr.  Reserve  for  Sinking  Fund. 

Condition  7.     Suppose  that  500  donated  shares  are  sold  at  $90.00  per  share: 

In  Journal 

Cash  $45,000.00. 

Stock  Discount,  5,000.00. 

Treasury  Stock,  $50,000.00. 

In  Stock  Ledger 

Dr.  John  Smith,  Treasurer. 

Cr.  Purchasers. 
Paying  Off  the  Bonds 

Condition  1.  The  periodical  reservations  of  cash  now  amount  to  the  total  of  the 
bond  issue.  All  the  cash  so  reserved  is  now  used  with  which  to  pay  the  bonds,  and  the 
following  entry   made: 

Dr.  The  bond  account  (under  proper  title). 
Cr.  Sinking  Fund  Assets. 

Condition  2.  When  a  nominal  reserve  which  has  been  created  out  of  the  Undi- 
vided Profits  account  has  reached  an  amount  equal  to  the  amount  of  the  bond  issue,  pay 
off  the  bonds  making  the  following  entry: 

Dr.  The  bond  account  (under  proper  title). 

Cr.  Whatever  assets  are  given  in  payment  (usually  cash). 

As  the  contingency  for  which  the  Sinking  Fund  Reserve  account  was  created  no 
longer  exists,  close  this  account  back  into  undivided  profits  by  the  following  entry: 

Dr.  Sinking  Fund  Reserve. 
Cr.  Undivided  Profits. 


CORPORATION  SET 

A  Manufacturing  Business 
Characteristics: 

In  the  following  set,  emphasis  is  placed  on  those  transactions  and  entries  which  are 
peculiar  to  corporations  and  corporation  accounting.  The  voucher  system  is  used  for 
the  payment  of  bills,  no  accounts  payable  being  kept.  Cost  of  production  is  shown  through 
cost  accounts  which  are  kept  separate  from  the  general  expense  accounts  and  which  are 
closed  into  the  Production  account.  Profit  distribution  to  the  reserve  accounts  and 
the  Dividend  account,  and  the  use  of  the  Undivided  Profits  account,  are  illustrated  in  a 
simple  manner. 

BOOKS  USED 

Subscription  Book. 

Stock  Certificate  Book,  and  stub. 

Stock  Ledger.  |    Described  on  pages  15  and  16. 

Installment  Receipt  Book,  and  stub 

Installment  Ledger. 

Cash  Book — described  on  pages  28  and  29. 

Sales  Book — usual  form. 

Vouchers  Payable  Register — described  on  pages  32  and  33. 

Journal — usual  form. 

Petty  Cash  Book — described  on  page  36. 

General  Ledger — usual  form. 

Sales  Ledger — This  book  has  an  extra  column  on  the  credit  side  for  discounts,  the 
net  amount  received  being  entered  in  the  general  column.  Credits  are  posted  to  the 
Sales  Ledger  on  the  line  exactly  opposite  the  corresponding  debits.  The  sales  accounts 
are  kept  separate  from  the  general  accounts  for  no  other  reason  than  that  a  different 
ruling  is  used.  Consider  the  Sales  Ledger  as  a  part  of  the  General  Ledger  in  taking  trial 
balances. 

ACCOUNTS  KEPT 

Stock  Ledger  accounts,  one-fourth  page  each. 
Installment  Ledger  accounts,  one-fourth  page  each. 
Sales  Ledger  accounts,  one-fourth  page  each. 
General  Ledger  accounts  as  follows: 

Capital  Stock 8  lines         Manufacturing  Labor 21  lines 

Subscription 12  lines         Manufacturing  Expense 21  lines 

Notes  Receivable 10  lines         Materials 21  lines 

Factory  &  Site 12  lines         Materials  Expense 18  lines 

Tools  &  Machinery 12  lines         In-Freight 12  lines 

Notes  Payable 10  lines         Cash  Discount  Cr 12  lines 

Vouchers  Payable 12  lines      *  Sales 21  lines 

Southern  Pine  Lumber  Co 8  lines         Out-Freight 21  lines 

Weyerhauser  &  Co 8  lines         Cash  Discount  Dr 16  lines 

Loss  &  Gain 16  lines         Reserve  for  Depreciation 8  lines 

Advertising 18  lines         Reserve  for  Surplus 8  lines 

Interest  &  Discount 21  lines         Dividend  No.  1 : 8  lines 

General  Expense 1  page         Dividend  No.  2 8  lines 

Implements 21  lines        Undivided  Profits 8  lines 

Production 21  lines 

24 


BOOKKEEPING 
CLASSIFICATION   OP   LOSS   OR  GAIN  ACCOUNTS 


25 


In-Prt. 


Cash  Dis. 
Cr. 


Out-Prt. 


Cash  Dis. 
Dr. 


Sales  Bk. 
Total 


M'fg. 
Labor 


Mfg.  Exp. 


P 


Materials 


Materials 
Exp. 


Sales 


Impl  'm'ts 


Advg. 


Product'n  Int.  &  Dis 


Loss  & 
Gain 


Qen'l  Exp  I 


Res.  for 
Deprec'n. 

/ 

Undivi'd 

/ 

Res.  for 

Surplus 

Profits 

s 

\ 

(Dividend 
[   No.  _ 

Explanation.  The  above  diagram  shows  the  relation  of  the  various  loss  or  gain 
accounts  to  each  other,  and  indicates  what  account  each  group  of  accounts  closes  into. 
Out-Freight,  Cash  Discount  Dr.,  and  the  Sales  Book  total,  close  into  the  Sales  account. 
Manufacturing  Labor,  Manufacturing  Expense,  Materials,  and  Materials  Expense  close 
into  Production  (after  In-Freight  and  Cash  Discount  Cr.,  which  are  subordinate  to 
Materials,  have  been  closed  into  Materials).  Sales  and  Production,  which  now  exhibit 
respectively  the  net  returns  on  merchandise  and  the  gross  cost  of  manufacture,  are  closed 
into  Implements,  which  is  the  Merchandise  account. 

Implements,  Advertising,  Interest  &  Discount,  and  General  Expense,  are  now  closed 
into  Loss  &  Gain.  The  net  profit  shown  by  the  Loss  &  Gain  account  is  transferred  to 
the  Undivided  Profits  account,  from  which  appropriations  are  made  from  time  to  time 
for  the  Reserve  for  Depreciation,  the  Reserve  for  Surplus,  and  the  Dividend 
accounts. 

Note.  Reserves  and  dividends  could  be  taken  directly  from  the  Loss  &  Gain  account,  thus  dispens- 
ing with  the  Undivided  Profits  account.  There  are  two  reasons,  however,  why  this  would  not  be  a  desir- 
able plan.  First,  the  Loss  &  Gain  account  would  have  to  carry  a  balance  (undivided  profits)  and  its  result 
at  the  time  of  closing  would  not  be  the  profit  for  the  period  covered  by  the  closing.  Second,  the 
distribution  of  profits  directly  from  Loss  &  Gain  would  have  the  same  effect  on  the  result  of  that  account. 
Under  the  arrangement  suggested  in  the  outline,  the  Loss  &  Gain  account  summarizes  the  profits  and  losses, 
and  the  Undivided  Profits  account  distributes  them,  the  closing  entry  always  indicating  the  net  profit 
for  the  period  before  depreciation  is  written  off. 

Note.  The  Production  account  is  not  closed  into  the  Implements  account  at  the  end  of  the  month 
by  the  customary  closing  entry,  but  the  cost  of  production  is  transferred  to  the  Implements  account  by 
frequent  journal  entries  debiting  Implements  and  crediting  Production  for  the  finished  implements  turned 
out  of  the  factory,  at  their  estimated  cost.  At  the  end  of  the  month  there  will  exist  a  slight  difference 
between  the  two  sides  of  the  Production  account,  occasioned  by  the  impossibility  of  exactly  estimating 
cost.    This  will  be  closed  to  the  Implements  account. 


2b  BOOKKEEPING 

TRANSACTIONS 

A  corporation  has  been  organized  under  the  name  of  The  Acme  Manufacturing  Com- 
pany, located  at  1220  Michigan  Ave.,  Chicago,  111.  Its  object  is  the  manufacture  and 
sale  of  agricultural  implements.  Its  capital  stock  is  $100,000.00,  divided  into  1000  equal 
shares  of  $100.00  each.  You  are  employed  as  bookkeeper,  at  a  monthly  salary  of  $75.00. 
The  secretary  hands  you  the  following  subscription  list,  requesting  you  to  copy  it  into 
the  proper  book  of  record: 


SUBSCRIPTION  LIST 

We,  the  undersigned,  hereby  subscribe  for  the  amount  of  Capital  Stock  in  The  Acme 
Manufacturing  Company  set  opposite  our  names  and  seals,  and  agree  to  pay  the  calls 
upon  the  said  stock  as  they  shall  be  made  by  the  directors  of  said  company. 


Date 

No.  of  Shares 

Amount 

Signature  and  Seal 

Residence 

19— 

April 

8 

Two  Hundred  Shares 

20000 

J.  E.  Colby 

(Seal) 

Chicago,  111. 

8 

Two  Hundred  Shares 

20000 

H.  M.  Miller 

(Seal) 

Champaign,  111. 

8 

Two  Hundred  Shares 

20000 

C.  J.  Barber 

(Seal) 

Chicago,  111. 

8 

One  Hundred  Fifty  Shares 

15000 

R.  E.  McCarthy 

(Seal) 

Milwaukee,  Wis. 

9 

One  Hundred  Fifty  Shares 

15000 

W.  L.  Sampson 

(Seal) 

Oak  Park,  111. 

9 

One  Hundred  Shares 

10000 

A.  F.  Harvey 

(Seal) 

Waterloo,  Iowa. 

This  subscription  list  binds  and  makes  responsible  the  subscribers  for  stock  whose  original  signatures 
appear  thereon. 

Placing  a  seal  after  the  signature  adds  solemnity  to  the  contract.  When  a  contract  is  under 
seal,  consideration  is  presumed. 

The  above  signatures  were  duly  acknowledged  as  required  by  law. 

Write  headings  in  your  Stock  Subscription  Book  as  in  the  above  list,  except  that  the 
word  "Name"  is  written  instead  of  the  words  "Signature  and  Seal"  in  the  second  wide 
column,  and  copy  the  subscription  list  therein.  As  yours  is  only  a  copy  of  the  original  sub- 
scriptions and  signatures,  it  will  not  be  necessary  for  you  to  set  a  seal  opposite  each  name 
as  shown  in  the  list.  In  practice  the  original  subscriptions  are  usually  written  directly 
into  the  Stock  Subscription  Book. 

The  narrow  column  at  the  extreme  right  hand  side  in  the  blank  book  is  not  shown 
on  the  list.  This  column  is  for  the  page  of  the  Installment  Ledger  on  which  the  sub- 
scriber's account  is  kept.     Head  it  "L.  F." 

Make  a  journal  entry  debiting  Subscription  and  crediting  Capital  Stock,  followed 
by  an  explanation  referring  to  the  list  of  subscribers  on  page  1  of  the  Stock  Subscription 
Book.     Date  this  entry  April  9. 

In  the  Installment  Ledger  debit  each  subscriber  for  the  amount  of  his  stock  sub- 
scription, entering  the  ledger  page  in  the  last  column  of  the  Stock  Subscription  Book. 
Before  making  any  entries  in  the  Installment  Ledger,  write  the  headings  of  the 
various  columns  as  shown  in  the  following  form: 


BOOKKEEPING 
W.  L.  SAMPSON 


27 


Date 

No. 
Shares 

Fol. 

Amount 

Date 

Install- 
ment No. 

% 

Receipt 
No. 

Amount 

19— 
April 

9 

Subscription 

150 

1 

15000 

19— 
April 
May 

20 
14 
27 

1 
2 
3 

50% 

25% 
25% 

5 
11 
17 

7500 
3750 
3750 

15000 

15000 

In  making  an  entry  in  the  Installment  Ledger  use  as  an  explanation  the  word 
"Subscription"  and  the  number  of  shares  subscribed  for,  and  enter  the  page  of  the  Stock 
Subscription  Book  from  which  the  item  is  posted. 

The  first  installment  of  50%  of  the  capital  stock  has  been  paid  by  all  subscribers 
in  cash.  The  treasurer  hands  you  Installment  List  No.  1  and  asks  you  to  make  the  proper 
entries.  Note  the  date  the  call  was  made  and  the  dates  upon  which  the  several  pay- 
ments were  made. 


INSTALLMENT  LIST  NO.  1 

In  accordance  with  a  resolution  of  the  board  of  directors  of  The  Acme  Manufactur- 
ing Company,  a  first  call  of  fifty  per  cent  of  the  capital  stock  of  said  company  is  due  and 
payable  on  the  10th  day  of  April,  19 — . 


Date  Reed 


19— 
April 


L.  F. 


Subscriber 


J.  E.  Colby 
H.  M.  Miller 
C.  J.  Barber 
R.  E.  McCarthy 
W.  L.  Sampson 
A.  F.  Harvey 


No.  Sh. 

Installm't 

Interest 

Am't  Reed 

200 

10000 

10000 

200 

10000 

10000 

200 

10000 

10000 

150 

7500 

12 

50 

7512 

50 

150 

7500 

12 

50 

7512 

50 

100 

5000 

8 

33 

5008 

33 

50000 

33 

33 

50033 

33 

Remarks 


Make  a  ruling  for  the  above  form  on  a  separate  sheet  of  paper  and  make  a  copy  of 
the  list,  which  you  will  preserve. 

Make  two  entries  on  the  debit  side  of  your  Cash  Book  dated  April  10  and  April  20 
respectively  crediting  Subscription,  and  one  entry  crediting  Interest  and  Discount.  (The 
interest  was  due  from  McCarthy,  Sampson  and  Harvey  because  they  did  not  pay  the 
installment  promptly  upon  call.)  All  three  entries  are  to  be  made  in  the  General  Column. 
Do  not  make  them  until  you  have  carefully  studied  the  form  of  Cash  Book  shown  on 
pages  28  and  29,  and  the  explanation  below  it. 


28 


BOOKKEEPING 
CASH   DR. 


19— 

10 
20 

20 
11 
13 

V 

Subscription 

Subscription 

Interest  &  Discount 

Sales 

J.  C.  Houston 

Installm't  No.  1      Receipts  1,  2,  3 
Installm't  No.  1      Receipts  4,  5,  6 
Int.  on  above,  as  per  Inst.  List  No.  1 
per  S.  B.  1 
Inv.  of  May  3  less  2  % 

C.  Dis.  Dr. 

General 

Apr. 
May 

12 

72 

30000 

20000 

33 

935 

623 

1120 

33 
00 
28 

18 

IS 

\ 

Notes  Receivable 

as  per  J2 

Cash  Discount  Dr 

** 

** 

Balance 

***** 

■ 

20 

P 

** 

***** 

** 

Explanation  of  Cash  Book.  The  regular  two-column  ruling  is  used.  The  left 
hand  column  on  both  debit  and  credit  sides  is  a  discount  column.  When  we  receive  cash 
less  a  discount  from  a  customer,  enter  the  net  amount  received  in  the  General  column, 
and  the  amount  of  the  discount  in  the  Cash  Discount  Dr.  column.  Post  both  the  dis- 
count and  the  net  payment  to  the  credit  of  the  customer.  In  closing  the  Cash  Book 
the  total  of  the  discount  will  not  be  added  into  the  General  column,  but  will  be  posted 
to  the  Cash  Discount  Dr.  account. 


Issue  installment  receipts  to  the  stockholders  for  the  amounts  of  their  first  payments, 
using  the  following  form.  When  interest  is  included  add  the  words  "and  interest,  $**.**" 
to  the  paragraph  acknowledging  receipt. 

Installment  Receipt  and  Stub 


Installment  Receipt  No.  gsL. 

&MZjnstoUment  «f  >fd  % 

tSL  4  0  Stores 


Amount  s/0<t<>a     A 


Installment  L.  F. 


Received   receipt  for  thit  in- 


'Signature  t/H.  M.  Miller. 


>©©@©©©©©©©©©@©©©©©©©@©©©©©©@©©©©©@©©©©©©©®©©©© 

J-  C  6  Shares  of  $100  each       X 


^saoac 


8Hp  Arm*  ifllamtfarturmg  (Eompattg 

Installment  Receipt  No._=? 


<***£x 


</L^f-,  call  of     >f~0 per  cent  on  £*■  £,  a     s/iares  of  the  capital  stock 


of  The  Acmf  Manufacturing  Company. 

The  said  shares  are  set  aside  for  him  or  his  assigns,  on  condition  that      © 
he  or  they  fulfill  the  terms  of  this  contract. 

3)n  Bitnrsa  tnlfc avf.  we  hereunto  subscribe  our  names,  in  the  city  of     X 
(»**t)  Chicago  this  /#£&/  X,.  nfLC&tA^C^ '.  19^^ 


we  hereunto  subscribe  our  names, 
v  oft^^tA^C^.  19^. 


ary  and  Treasurer. 

§©©©©©©©©©©©©@©®©®®©©©@©©@©@@@©©©©©@©@©@©©©*«r»«r 


BOOKKEEPING 

CASH  CR. 


29 


19— 

1 
3 
3 
3 
3 

18 

18 

18 
18 

V 

V 
V 

V 

V 

Voucher  No.  1 
Voucher  No.  4 
Voucher  No.  6 
Voucher  No.  8 
Voucher  No.  9 

Critchell  &  Whitney 
C.  R.  I.  &  P.  R.  R. 
Ford  &  Wilson 
C.  B.  &  Q.  R.  R. 

Payroll 

C.Dis.  Cr. 

General 

May 

30000 

18 

8 

6 

125 

12 

2.1 
60 
50 
80 

Voucher  No.  24             Edna  Wilson 

Cash  Discount  Cr.  and  Vouchers  Payable  Dr. 

Vouchers  Payable  Dr. 
Balancef 

60 

** 

** 

***** 

** 
** 

***** 
i'_    ... 

** 

fThis  line  and  all  rulings  to  be  in  red  ink. 

When  we  pay  the  full  amount  called  for  by  any  voucher,  an  entry  will  be  made  on 
the  credit  side  of  the  Cash  Book  in  the  General  column,  the  number  of  the  voucher  and 
the  name  of  the  person  paid  being  used  as  explanation.  Should  we  pay  a  bill  less  a  dis- 
count, the  net  amount  only  will  be  entered  in  the  General  column,  the  discount  being 
entered  in  the  Cash  Discount  Cr.  column.  The  total  of  the  Cash  Discount  Cr.  column 
is  posted  to  the  debit  of  Vouchers  Payable  and  to  the  credit  of  Cash  Discount  Cr.,  and 
is  not  added  into  the  General  column.  The  total  of  the  General  column  is  posted  to  the 
debit  of  Vouchers  Payable.  You  have  no  use  for  the  L.  F.  column  on  the  credit  side  of 
the  Cash  Book.     You  may  ignore  it,  or  check  it  as  each  entry  is  made. 

Write  the  proper  headings  in  your  Cash  Book  before  making  any  entries. 


The  signature  of  W.  H.  Miller,  vice-president,  should  appear  on  the  receipt  issued  to  J.  E.  Colby, 
in  place  of  Mr.  Colby's  signature,  and  on  the  receipt  issued  to  C.  J.  Barber,  in  place  of  Mr.  Barber's  sig- 
nature. It  is  not  considered  the  best  practice  for  an  official  to  sign  a  receipt  issued  to  himself,  even 
when  the  receipt  has  the  signature  of  two  officials. 

Your  teacher  will  sign  the  receipts  for  all  officials  or  will  authorize  some  one  to  sign  them. 

Post  from  the  stubs  of  the  receipts  to  the  credit  of  the  subscribers  to  whom  the  receipts 
were  issued,  as  shown  in  the  illustration  of  W.  L.  Sampson's  account  on  page  27.  The 
"Receipt  No."  column  is  equivalent  to  a  folio  column.  Enter  the  ledger  folios  in  the 
spaces  provided  for  that  purpose  on  the  stubs. 

May  1.  The  Acme  Manufacturing  Company  has  this  day  purchased  of  Critchell  & 
Whitney,  Chicago,  111.,  their  plant  located  at  1220  Michigan  Ave.,  and  other  assets,  as 


30  BOOKKEEPING 

follows,   Critchell   &   Whitney   retaining   all   their    old   accounts,    both    receivable    and 
payable: 

Factory  &  Site  $16500.00 

Tools  &  Machinery  13500.00 

Materials  on  hand  4500.00 

Implements  (finished)  2430.50 

G.  E.  Baker's  90-day  note  dated  April  1                         1650.00 

Interest  on  above,  **  days  at  6%  *.** 
M.  L.  Rankin's  note  at  6%  dated  Mar.  11  and  due 

six  months  after  its  date  3500.00 

Interest  on  above  **  days  at  6%  **.** 

Payment  was  made  to  Critchell  &  Whitney  as  follows:  Cash  was  paid  for  Factory  & 
Site  and  Tools  &  Machinery,  and  an  agreement  was  made  to  pay  the  balance,  $**♦**.** 
on  July  1,  this  time  being  allowed  by  Critchell  &  Whitney  in  which  to  collect  the  notes 
and  dispose  of  the  materials  and  implements  on  hand. 

THE  VOUCHER  SYSTEM 

One  of  the  by-laws  of  the  company  is  that  the  bills  are  to  be  paid  by  the  treasurer, 
who  must  be  able  to  show  a  voucher  for  every  disbursement  of  cash,  which  voucher  shall 
be  signed  by  the  president  of  the  company  and  by  the  person,  firm,  or  corporation  receiv- 
ing the  money.  (Your  teacher  will  instruct  you  as  to  how  these  signatures  may  be  secured.) 
Whenever  anything  is  bought  or  it  is  necessary  for  funds  to  be  paid  out  by  the  treasurer 
for  any  purpose,  you  must  fill  out  a  voucher,  showing  all  necessary  facts  in  regard  to  the 
disbursement.  This  voucher  must  then  be  signed  by  the  president,  who  acts  upon  author- 
ity conferred  by  the  directors. 

In  every  case  the  voucher  is  to  be  made  out  and  signed  by  the  president  at  the  time 
the  obligation  is  incurred,  and  will  remain  attached  to  the  stub  until  time  for  payment. 
You  will  then  detach  the  voucher  from  its  stub  and  deliver  it  to  the  treasurer  for  pay- 
ment.    He  will  see  that  the  receipt  is  signed  and  the  voucher  returned  to  you. 

Fill  out  a  voucher  for  the  payment  of  $30000.00  to  Critchell  &  Whitney,  as  shown 
by  the  form  on  page  31. 

Note.  Vouchers  and  checks  are  sometimes  combined  in  the  "Voucher  check."  When  voucher 
checks  are  used  the  return  of  the  voucher  by  the  payee  is  assured,  as  the  voucher  check  is  returned  to 
the  drawer  through  the  bank  the  same  as  any  other  check.  Banks  do  not  like  to  handle  voucher  checks, 
because  they  are  cumbersome  and  impose  too  great  a  responsibility  upon  the  bank  which  honors  them. 
From  the  standpoint  of  the  business  man  it  is  objectionable  to  combine  the  voucher  and  check  because 
the  voucher  is  made  out  at  the  time  the  obligation  is  incurred,  while  the  check  should  be  made  out  at  the 
time  of  payment;  and  for  the  further  reason  that  the  return  of  the  voucher  is  delayed  when  it  must  pass 
through  the  bank.     On  the  whole,  the  plan  of  issuing  vouchers  and  checks  separately  is  the  better. 

At  the  time  the  voucher  is  filled  out,  the  amount  is  written  in  the  form  of  "  Payee's 
Receipt"  (as  a  convenience  to  the  payee),  and  the  stub  is  filled  out  all  except  the  last 
two  lines. 

Make  out  voucher  No.  2  for  the  balance  due  Critchell  &  Whitney  on  July  1.  This 
voucher  should  contain  a  list  of  the  items  covered  by  it.  The  voucher  will  not  be  detached 
until  time  for  payment. 


BOOKKEEPING 


31 


Form  of  Voucher  and  Stub 


NoJL 


Payee  please  sign  and  return  promptly 


Voucher  No.-=<— 


aty?  Ktmt  ifatrnfariurmg  (Eompattj} 


Payel, 

Date       7??*^  /     »U=        j       °;i 


Entered  in  V.  Pay.  Reg. — >^ — 
Date  Paid    /TZnTsif  ' /.19-=- 


w 


>^<^^^^l^/>v^^^y^^^^(^^g«!^^ 


y^W^  ^  ^<^4^Wiy 


-^^«g< 


Authorized  by 


Manufacturing  Company 
Dollars, 


THE  VOUCHERS  PAYABLE  REGISTER 

It  is  now  necessary  to  record  Vouchers  No.  1  and  2  in  the  Vouchers  Payable  Reg- 
ister. All  items  payable  (including  cash  items  payable  at  once)  are  entered  in  the  Vouch- 
ers Payable  Register  as  soon  as  the  account  is  contracted  or  the  obligation  is  incurred; 
in  other  words,  at  the  time  the  voucher  is  filled  out.  No  accounts  payable  are  opened 
in  the  Ledger,  because  it  is  the  intention  of  the  directors  to  pay  each  invoice  as  it  falls 
due.  When  bills  are  paid  the  fact  of  their  payment  is  recorded  in  the  proper  column. 
Until  paid,  the  fact  that  they  are  unpaid  may  be  readily  ascertained  by  an  inspection 
of  the  Vouchers  Payable  Register.  There  would  be  nothing  gained  by  keeping  accounts 
with  creditors. 

The  form  on  pages  32  and  33  shows  the  first  four  vouchers.  Study  the  form  and  its 
explanation  now,  copy  the  headings,  and  make  the  entries  for  Vouchers  No.  1  and  2.  These 
two  vouchers  are  for  the  same  transaction  but  are  made  separate  for  convenience. 

The  transaction  on  May  1  is  quite  an  important  one,  and  somewhat  complicated. 
You  will  therefore  turn  to  your  Journal,  after  making  the  two  entries  in  the  Vouchers  Pay- 
able Register,  and  make  a  full  memorandum  therein  of  this  entire  transaction  with  com- 
plete explanations.  Write  no  amounts  in  the  money  columns,  as  this  memorandum 
will  not  be  posted. 

As  soon  as  the  first  two  vouchers  have  been  recorded  properly,  detach  Voucher  No.  1 
from  its  stub,  check  the  entry  on  the  stub,  enter  the  date  of  payment  on  the  stub,  brief 
the  voucher,  and  deliver  it  to  the  treasurer  for  payment.  Fill  out  the  When  &  How  Paid 
column  in  the  Vouchers  Payable  Register. 

Briefing  the  Voucher.  For  convenience  in  filing  and  ease  of  reference,  the  voucher 
should  be  "  briefed."  The  form  of  brief  is  printed  on  the  back  of  the  voucher.  The  best 
time  to  fill  this  out  is  when  the  voucher  is  detached  for  payment.  The  form  of  brief  is 
simple,   and   needs  no  special  explanation. 

Make  the  entry  for  Voucher  No.  1  in  the  Cash  Book  at  this  time. 

May  2.  Bought  of  D.  C.  Wade,  2691  Lake  Ave.,  City,  2\  M  ft.  oak  lumber,  at  $80.00 
per  M  ft.,  bill  dated  May  2,  terms  1/10,  n/30. 


32 


BOOKKEEPING 
VOUCHERS  PAYABLE 


No. 

Date 

Payable  to 

Address 

Dating 

Terms 

Due  Date 

19— 

19— 

1 

May 

1 

Critchell  &  Whitney 

Chicago,  111. 

May 

1 

Cash 

May 

1 

19- 

2 

1 

Critchell  &  Whitney 

Chicago,  111. 

May 

1 

2mo 

July 

1 

19— 

3 

2 

D.  C.  Wade 

2691  Lake  St.,  City 

May 

2 

1/10  n/30 

May 

12 

19— 

4 

3 

C.  R.  I.  &  P.  R.  R. 

May 

3 

Cash 

May 

3 

19— 

Explanation  of  Vouchers  Payable  Register. 

Note  that  this  form  extends  across  two  pages.  The  vouchers  are  entered  in  the  order 
of  their  number.  The  date  at  the  left  of  the  form  is  the  date  of  the  entry.  The  "  Dat- 
ing" is  the  date  given  to  the  bill  by  the  seller.  When  goods  are  shipped  to  us  from  out- 
side of  the  city  this  dating  will  be  a  day  or  two  previous  to  the  date  of  our  entry,  unless 
the  invoice  be  "dated  ahead"  by  agreement.  The  due  date  is  ascertained  from  the  dat- 
ing and  terms.  The  bookkeeper  should  examine  the  Due  Date  column  daily.  A  separate 
space  for  the  year  date  is  given  in  the  Due  Date  column,  as  year  dates  might  alternate 
in  this  column.  The  amount  of  the  voucher  is  entered  in  the  Vouchers  Payable  Cr.  column, 
the  total  of  which  is  posted  to  the  Vouchers  Payable  account  in  the  Ledger.     The  number 


VARIABLE  PRICE  LISTS 

Your  teacher  will  instruct  you  to  use  the  prices  given  in  the  book  or  will  assign  to 
you  one  of  these  price  lists.  If  a  special  price  list  is  assigned,  use  the  prices  it  quotes 
on  the  articles  named.  On  all  other  articles  use  the  prices  given  in  the  text.  Always 
use  the  same  list  number  for  selling  prices  and  buying  prices. 


BUYING  PRICES 


Article 

ListI 

List  2 

List  3 

List  4 

List  5 

List  6 

List  7 

List  8 

List  9 

List  10 

Oak  lumber 

$75.00 

$75.50 

$75.60 

$76.00 

$76.50 

$77.00 

$77.50 

$78.00 

$79.00 

$79.50 

Bar  steel 

3f 

3* 

3i 

it 

3* 

i! 

3* 

3* 

3* 

3* 

Steel  castings 

H 

4* 

4 

3* 

3* 

4* 

4 

4i 

Hickory  lumber 

$35.25 

$34.25 

$34.00 

$34.50 

$35.00 

$36.00 

$37.00 

$38.00 

$34.50 

$34.00 

Ash  lumber,  clear 

39.90 

39.80 

39.75 

39.50 

39.25 

39.00 

38.75 

38.50 

38.25 

38.00 

White  pine  lumber 

24.00 

24.10 

24.20 

24.25 

24.30 

24.40 

24.45 

24.50 

24.60 

24.75 

8d  naila 

4.50 

4.60 

4.70 

4.50 

4.40 

4.30 

4.25 

4.50 

4.40 

4.60 

Clinch  nails 

6.10 

6.20 

6.00 

5.90 

6.25 

5.75 

5.80 

5.90 

6.10 

6.20 

BOOKKEEPING 
REGISTER 


33 


Vouch.  Pay.  Cr 

Mfg.  Labor  Dr. 

Sundry  Accounts  Dr. 

L.F. 

When  and  How  Paid 

Amount 

Account 

When 

How  Paid 

30000 
***** 

200 

4500 
200 

$16500 

13500 

2430 

5150 

** 

60 

Factory  &  Site 
Tools  &  Mach. 
Implements 
Notes  Rec. 
Interest 

/ 

!9— 
May 

1 
V 

Cash 

'  V 

18 

25 

18 

25 

Out-Freight 

May 

3 

Cash 

***** 

** 

**** 

** 

**** 

** 

© 

© 

© 

in  the  circle  underneath  the  total  shows  the  ledger  page  to  which  the  total  was  posted. 
There  are  three  debit  columns,  and  each  item  should  be  entered  in*  one  of  these  three 
columns.  The  total  of  the  Materials  and  Manufacturing  Labor  columns  are  posted  to 
the  debit  of  those  accounts.  All  items  besides  Materials  and  Manufacturing  Labor  are 
entered  in  the  Sundry  Accounts  Dr.  column,  from  which  they  are  separately  posted  to 
the  proper  accounts.  The  names  of  the  accounts  to  be  debited  are  written  opposite  all 
items  in  the  Sundry  column.  A  space  for  the  ledger  folio  is  given,  but  when  items  are 
written  in  either  of  the  special  columns  (Materials  or  Manufacturing  Labor,  which  are 
posted  in  total)  a  check  mark  is  placed  in  the  L.  F.  column.  The  "When  and  How  Paid" 
columns  are  filled  out  when  payment  is  made.  One  line  is  usually  sufficient  for  each 
voucher,  but  two  lines  were  devoted  to  Voucher  No.  1  and  three  lines  to  Voucher  No.  2, 
for  convenience  in  posting.  The  addition  of  the  Vouchers  Payable  Register  may  be 
proved  at  any  time  by  determining  whether  the  footings  of  the  three  debit  columns,  added, 
gives  the  total  of  the  credit  column. 


SELLING 

PRICES  (GROSS) 

Article 

List  1 

List  2 

List  3 

List  4 

List  5 

List  6 

List  7 

List  8 

List  9 

List  10 

Land  rollers 

$24.50 

$25.00 

$25.25 

$24.25 

$24.50 

$24.75 

$25.00 

$24.70 

$24.60 

$24.30 

Climax  plows 

8.50 

8.60 

8.70 

8.80 

8.90 

9.00 

9.10 

9.20 

9.30 

9.40 

E  29  chilled  plows 

3.55 

3.60 

3.65 

3.70 

3.75 

3.80 

3.85 

3.90 

3.85 

3.95 

No.  237  corn  planters 

37.90 

37.80 

37.70 

37.60 

37.50 

37.40 

37.30 

37.20 

37.10 

37.00 

No.  47  spring  tooth  harrows 

12.90 

12.80 

12.70 

12.60 

12.50 

12.40 

12.30 

12.20 

12.10 

12.00 

No.  01  cultivators 

17.10 

17.20 

17.30 

17.25 

17.50 

17.70 

17.75 

17.80 

17.90 

17.50 

Corn  King  disc  harrows 

22.00 

22.10 

22.20 

21.90 

22.00 

22.25 

21.75 

22.00 

22.10 

22.20 

Self  dump  hay  rakes 

21.00 

21.25 

21.00 

20.75 

20.50 

20.60 

20.70 

20.80 

20.90 

21.00 

Junior  hay  stackers 

45.00 

45.50 

45.75 

45.25 

46.00 

46.25 

46.50 

46.00 

45.50 

45.75 

No.  4  gang  plows 
Hand  dump  hay  rakes 

57.00 

58.00 

59.00 

60.00 

57.00 

58.00 

59.00 

60.00 

59.00 

58.00 

15.00 

15.25 

15.50 

16.00 

16.25 

16.50 

16.00 

15.00 

15.50 

15.00 

B  26  riding  cultivators 

25.00 

26.00 

27.00 

28.00 

29.00 

30.00 

31.00 

32.00 

33.00 

34.00 

34  BOOKKEEPING 

Make  out  Voucher  No.  3  and  have  it  signed  by  the  president.  Let  the  voucher  remain 
attached  to  its  stub. 

Before  making  the  entry  in  the  Vouchers  Payable  Register,  determine  whether  it 
will  be  more  advantageous  to  pay  the  bill  on  May  12  or  June  1.  If  you  find  it  will  pay 
to  discount  the  bill,  enter  May  12  as  the  due  date.  The  Materials  account  is  to  be  charged; 
you  will  therefore  enter  the  $200.00  in  the  "Materials  Dr."  column,  as  well  as  in  the 
"Vouchers  Payable  Cr."  column.  Check  in  the  L.  F.  column.  Do  not  fill  out  the 
"When  and  How  Paid"  column  until  the  bill  is  paid.     Check  the  voucher  stub. 

The  treasurer  has  paid  Critchell  &  Whitney  the  $30,000.00  called  for  by  Voucher 
No.  1  and  now  returns  to  you  the  receipted  voucher. 

Note.  Your  teacher  will  instruct  you  as  to  who  will  sign  the  voucher  for  Critchell  &  Whitney. 
When  it  is  signed,  fold  it  so  that  the  briefing  will  be  on  the  outside,  and  file  it  away  carefully. 

May  3.  Received  from  J.  C.  Houston,  Peoria,  111.,  an  order  for  24  No.  30  road  plows 
at  $13.50;  1  land  roller,  at  $24.00;  and  32  Climax  plows,  at  $9.00.  We  have  shipped 
these  today  via  the  C.  R.  I.  &  P.  R.  R.,  terms  2/10  n/30,  and  paid  the  freight  charges 
of  $18.25  ourselves. 

Note.  Wholesale  implements  are  usually  sold  early  in  the  year  (in  January  or  February)  and  shipped 
before  the  retailer's  sales  begin.  The  bills  are  usually  given  a  June  1  dating,  less  5%  for  cash  on  April  1, 
this  dating  and  terms  being  given  to  all  bills  sold  early  in  the  season.  The  terms  quoted  Mr.  Houston 
are  not  so  liberal,  as  the  sale  was  made  later  in  the  season.  Bills  for  fall  goods  sold  will  be  given  the  usual 
liberal  terms.  / 

Debit  J.  C.  Houston  in  the  Sales  Book  for  the  amount  of  the  sale. 

Fill  out  Voucher  No.  4  for  $18.25  for  the  freight.  Secure  the  president's  signature. 
Make  the  entry  in  the  Vouchers  Payable  Register,  charging  Out-Freight.  Assuming 
that  the  treasurer  has  given  you  a  check  for  $18.25  which  you  have  cashed,  and  that  you 
have  paid  the  freight  agent,  requiring  him  to  sign  the  voucher,  you  will  now  file  the  voucher. 
Fill  out  the  "When  and  How  Paid"  column  in  the  Vouchers  Payable  Register. 

Note.  Your  teacher  will  instruct  you  as  to  who  will  sign  this  voucher  for  the  payee.  All  other 
vouchers  will  be  signed  for  the  payee  in  the  same  way.  No  further  reference  will  be  made  to  this 
matter. 

Enter  the  $18.25  on  the  credit  side  of  the  Cash  Book  in  the  General  column,  as  shown 
in  the  illustration  of  the  Cash  Book. 

Note.  It  will  be  seen  that  the  Vouchers  Payable  account  is  credited  in  the  Vouchers  Payable  Reg- 
ister for  $18.25,  and  debited  through  the  Cash  Book  for  the  same  amount  (since  the  total  of  Cash  Cr.  is 
posted  to  the  debit  of  Vouchers  Payable).  This  debit  and  credit  offset  each  other.  The  ultimate  result 
of  the  two  entries  is  that  Out-Freight  is  debited  through  the  Vouchers  Payable  Register,  and  Cash  is  cred- 
ited in  the  Cash  Book. 

May  3.  Bought  from  J.  T.  Ryerson  &  Son,  1821  21st  St.,  11679  lbs.  bar  steel  at 
3££  per  pound,  terms  2/10  n/30. 

Make  out  Voucher  No.  5.  Let  it  remain  attached  to  its  stub.  Enter  the  purchase 
in  the  Vouchers  Payable  Register,  charging  Materials.     Check  in  the  folio  column. 

May  3.     Bought  of  Ford  &  Wilson,  229  State  St.,  for  cash,  10  gal.  Machine  Oil,  at  850. 

Make  out  Voucher  No.  6.  Make  entry  in  the  Voucher  Payable  Register,  charging 
Manufacturing  Expense.     Detach  the  voucher  and  secure  the  president's  signature. 

You  have  shown  the  voucher  to  the  treasurer,  secured  from  him  a  check  for  the  amount, 


BOOKKEEPING  35 

paid  Ford  &  Wilson,  and  obtained  their  signature  to  the  receipt.  Enter  the  date  of  pay- 
ment on  the  voucher  stub.  File  the  voucher.  Fill  out  the  When  &  How  Paid  column 
in  the  Vouchers  Payable  Register. 

Note.     Keep  the  vouchers  in  numerical  order. 

Make  the  entry  in  the  Cash  Book,  using  the  proper  explanations. 

May  3.  Bought  of  Robert  Law,  491  E.  30th  St.,  on  account,  10  tons  of  nut  coal, 
at  $7.60. 

Make  out  Voucher  No.  7. 

Record  the  voucher  in  the  Vouchers  Payable  Register,  charging  Manufacturing  Ex- 
pense. No  terms  were  written  on  the  invoice,  but  it  is  understood  that  the  bill  is  due 
the  first  of  next  month.     You  will  therefore  so  record  it. 

May  3.  Shipped  today  to  J.  L.  Cashel,  LaCrosse,  Wis.,  via  the  C.  B.  &  Q.  R.  R., 
21  Climax  plows,  at  $9.00,  terms  2/10  n/30.  Prepaid  freight  for  him,  $6.50,  and  charged 
his  account  for  the  Mdse  and  the  freight. 

Charge  J.  L.  Cashel  through  the  Sales  Book  for  the  amount  of  the  Mdse. 

Fill  out  Voucher  No.  8  for  the  amount  of  the  freight.  Having  obtained  the  presi- 
dent's signature  to  the  voucher,  secured  a  check  from  the  treasurer  for  the  $6.50,  paid 
the  freight  agent,  and  secured  his  signature  to  the  receipt,  you  will  now  file  the  voucher 
in  its  order. 

Note.  No  further  reference  will  be  made  to  the  procedure  of  securing  the  proper  signature  to  the 
vouchers  and  paying  the  bills.  It  will  be  understood  by  you  that  this  is  always  done,  but  hereafter  you 
need  only  to  fill  out  the  vouchers,  have  them  properly  signed,  and  file  them  in  numerical  order. 

Record  Voucher  No.  8  in  the  Vouchers  Payable  Register,  charging  J.  L.  Cashel. 
Make  the  entry  in  the  Cash  Book. 

May  4.  The  weekly  payroll  is  handed  in  today  by  the  time-keeper,  and  the  men  are 
paid  off.     The  total  amount  of  the  payroll  is  $125.60. 

Fill  out  Voucher  No.  9. 

In  making  the  entry  in  the  Vouchers  Payable  Register,  charge  $15.00  to  Materials 
Expense;  this  amount  is  the  total  of  wages  paid  to  draymen  and  other  workmen  who 
hauled  and  handled  materials.  Charge  $10.00  to  General  Expense;  this  is  the  salary  of 
the  janitor.     Charge  the  rest  to   Manufacturing   Labor. 

Note.  The  first  two  items  are  said  to  be  "non-productive"  labor,  as  they  represent  work  done  which 
produced  nothing.  The  Manufacturing  Labor  account  contains  items  of  productive  labor.  The  first 
item,  $15.00,  was  charged  to  Materials  Expense,  because  it  virtually  increased  the  cost  of  materials.  The 
three  items  can  be  entered  on  two  lines  of  the  Vouchers  Payable  Register. 

Make  the  entry  in  the  Cash  Book. 

May  4.  Paid  Edna  Wilson,  the  stenographer,  her  salary  for  four  days,  $6.67.  Make 
out  a  voucher  for  this.  Enter  in  the  Vouchers  Payable  Register,  charging  General  Ex- 
pense.    Make  the  Cash   Book  entry. 

May  6.  Paid  James  Quinn,  191  Randolph  St.,  cash  for  1640  lbs.  steel  castings  at 
40,  less  2%  for  cash. 

Fill  out  Voucher  No.  11  for  the  gross  amount  of  the  bill,  detach,  and  file  it. 

Make  the  proper  record  in  the  Vouchers  Payable  Register,  charging  Materials.  Write 
"Cash  less  2%"  in  the  Terms  column  and  in  the  How  Paid  column. 

Make  the  entry  in  the  Cash  Book.  Enter  the  net  amount  in  the  General  column 
and  the  discount  in  the  Cash  Discount  Cr.  column. 


36 


BOOKKEEPING 


May  6.  Bought  of  Mears  &  Bates,  2650  Wells  St.,  on  account,  20  M  ft.  hickory 
lumber  at  $35.00.  Terms,  Note  60  days  or  2%  off  for  cash  in  ten  days.  We  will  take 
advantage  of  the  discount. 

Fill  out  Voucher  No.  12.     Let  it  remain  attached  to  its  stub  for  the  present. 

Make  the  entry  in  the  Vouchers  Payable  Register,  charging  Materials. 

May  6.  Shipped  today  via  C.  B.  &  Q.  R.  R.  to  Warren  &  Co.,  Muscatine,  Iowa, 
14  #E73  walking  gang  plows,  at  $15.00;  45  Climax  plows,  at  $9.00;  and  5  disc  harrow 
blades,  at  500.     Terms  2/10  n/30.     Freight  charges  were  paid  by  them. 

May  6  Bought  of  Bishop  &  Warner,  124  Clark  St.,  for  cash,  4  kegs  8d  nails  at 
$4.50;  2  kegs  clinch  nails  at  $7.00.     Terms  2%  off  for  cash. 

Fill  out  Voucher  No.  13. 

Record  the  purchase  in  the  Vouchers  Payable  Register,  charging  Materials. 

Make  the  entry  in  the  Cash  Book.  The  net  amount  is  entered  in  the  General  column, 
and  the  amount  of  the  discount  in  the  Cash  Discount  Cr.  column. 

May  7.  Received  from  T.  D.  Philips,  Rock  Island,  111.,  on  account,  12  M  ft.  ash 
lumber,  clear,  at  $40.00.  His  bill  is  dated  May  5.  Terms  2/20  n/40.  The  lumber  was 
sold  F.O.B.  Rock  Island. 

Make  out  Voucher  No.  14,  leaving  it  attached  to  the  stub.  In  making  the  record 
in  the"  Vouchers  Payable  Register,  charge  Materials. 

May  7.  The  lumber  from  Rock  Island  was  shipped  to  us  via  the  C.  R.  I.  &  P  R.  R., 
freight  charges  collect.  We  paid  the  freight  bill,  which  amounted  to  $14.50.  Fill  out 
a  voucher  for  this,  and  make  an  entry  in  the  Vouchers  Payable  Register,  charging 
In-Freight.     Make  the  Cash  Book  entry. 

May  7.  Sold  on  account  to  F.  E.  Durrell,  Quincy,  111.,  50  No.  E29  chilled  plows, 
at  $3.50;  and  12  No.  60  spring  lift  gang  plows,  at  $42.50;  less  trade  discount  of  20%  on 
entire  bill.     Terms  2/10  n/60.     Shipped  freight  charges  collect. 

May  7.  For  convenience  in  paying  small  items  it  has  been  decided  to  entrust  you 
with  $20.00  which  you  may  use  to  pay  certain  small  items  for  which  it  is  not  possible 
or  convenient  to  issue  a  voucher  at  the  time  of  payment.  You  are  to  keep  a  correct  record 
of  these  petty  items  in  the  Petty  Cash  Book,  the  form  of  which  is  here  shown. 


PETTY  CASH  BOOK 


Vouch- 
er No. 

Page 

Paid  for 

Sundry  Accounts  Dr. 

Materials 

Mfg 

Date 

Date 

Account 

L.F. 

Amount 

Dr. 

Labor  Dr. 

19— 
May 

7 
"20 

16 
Bal. 

1 

20 

20 
6 

57 

19— 
May 

S 
11 
15 

18 
18 
18 
18 

Postage 
lgal.Varnish 
H.  Wilke 
Sundries 

* 

GenlExp. 

GenlExp. 
Materials 
Mfg.  labor 
Balance 

V 

V 

2 

7 

3 

6 

20 

65 
65 
13 
57 

65 

3 

13 

65 

3 

13 

May 

♦This  line  and  all  rulings  to  be  in  red  ink. 
Fill  out  a  voucher  in  the  usual  form  for  $20.00  with  the  explanation  "For  Petty 
Cash,"  and  secure  the  president's  signature.     Enter  the  voucher  in  the  Vouchers  Pay- 


BOOKKEEPING  37 

able  Register,  charging  Petty  Cash.  Make  an  entry  on  the  credit  side  of  the  Cash  Book 
in  the  usual  way.  Post  the  item  from  the  Vouchers  Payable  Register  to  the  Petty  Cash 
book  at  once.  (This  makes  the  Petty  Cash  book  a  part  of  your  double  entry  system. 
Its  balance  must  be  included  in  the  trial  balance.) 

May  7.  The  factory  superintendent  hands  in  an  itemized  report  on  finished 
implements  the  estimated  cost  of  which  is  $3008.50.  Make  a  journal  entry  debit- 
ing Implements  and  crediting  Production,  and  for  a  full  understanding  of  the  entry  read 
the  following  paragraphs  on  The  Production  Account  and  work  out  the  problem  given 

herewith. 

• 

The  Production  Account. 

The  purpose  of  the  Production  account  is  to  show  costs  of  manufacture,  and  returns, 
estimated  at  cost,  on  the  finished  articles  as  they  are  turned  into  the  storeroom. 

The  Production  account  is  debited  with  the  net  results  of  the  Materials  account, 
the  Materials  Expense  account,  the  Manufacturing  Labor  account,  and  other  manu- 
facturing cost  accounts,  which  are  closed  into  it.  It  is  credited  with  the  value  of  the 
finished  product  estimated  at  a  standard  cost  figure. 

Since  the  debit  side  of  the  account  exhibits  costs  and  the  credit  side  exhibits  the 
finished  product  valued  at  cost,  it  follows  that  if  the  costs  could  be  computed  with  exact- 
ness and  the  value  of  the  finished  product  estimated  to  the  cent,  the  Production  account 
would  close  without  a  balance.  But  exactness  is  not  possible  in  either  of  these  matters, 
hence  the  Production  account  always  exhibits  a  slight  discrepancy  between  the  debit 
and  credit  sides  at  the  end  of  the  month.  This  discrepancy  is  closed  into  the  Merchan- 
dise account. 

Prices  of  materials  fluctuate,  and  it  is  not  possible  to  ascertain  the  exact  cost  of  the  identical  materials 
used  in  manufacturing  a  given  article.  The  adoption  of  a  standard  cost  figure  for  that  article  is  the  only- 
satisfactory  solution  of  the  problem.  Further,  this  plan  furnishes  an  opportunity  for  the  factory  to  dem- 
onstrate its  ability  to  reduce  costs,  or  to  manufacture  for  less  than  the  standard  estimated  cost  price. 

Some  houses  prefer  to  estimate  costs  at  a  somewhat  higher  figure  than  actual  cost  so  that  the  sale 
force  will  not  know  exactly  what  the  cost  is.  If  the  finished  product  is  billed  to  the  sales  department 
at  a  safe  figure,  then  the  house  would  not  lose  even  if  the  sales  force  should  cut  down  prices  to  what  it 
considered  the  lowest  limit. 

The  Production  account  is  an  intermediate  account,  coming  between  the  individual  cost  accounts 
and  the  Mdse  account.  It  summarizes  the  costs.  The  separate  cost  accounts  could  of  course  all  be  closed 
directly  into  the  Mdse  account,  no  Production  account  being  used,  but  this  would  make  the  Mdse  account 
very  cumbersome.  The  use  of  the  Production  account  relieves  the  Mdse  account  of  a  great  number  of 
entries.  (In  the  following  problem  only  three  cost  accounts,  viz.,  Materials,  Materials  Expense  and  Man- 
ufacturing Labor,  are  closed  into  the  Production  account.  These  are  sufficient  for  purposes  of  illustra- 
tion, yet  there  might  be  dozens  of  such  accounts.) 

Work  the  following  problem  on  loose  sheets,  using  one  sheet  of  journal  paper  and 
one  sheet  of  ledger  paper.     Allow  four  ledger  accounts  to  the  page. 

Problem*.     July  1,  19—.     Kimball  &  Co.  have  on  hand  $50,000.00  in  Cash,  Pianos 

(Mdse)  valued  at  $100000.00,  Materials  valued  at  $20000.00,  and  owe  workmen  for  unpaid 

wages  $2500.00.     Open  accounts  with  Cash,  Pianos,  Materials,  and  Manufacturing  Labor, 

showing  the  above  inventories  and  the  cash  balance.      Open  Kimball  &  Co.'s  account. 

July  10.     Paid  cash  for  materials,  $10000.00. 

July  12.     The  foreman  of  the  factory  turned  over  to  the  superintendent  of  the  Stock- 
optional. 


38  BOOKKEEPING 

room  125  finished  pianos,  at  an  estimated  cost  of  $95.37  each.  Open  a  Production  account. 
Debit  Pianos  and  credit  Production. 

July  15.  Paid  workmen  for  labor,  $5000.00  in  cash.  $500.00  of  this  is  chargeable 
to  Materials  Expense.     Open  a  ledger  account  under  the  heading  "Materials  Expense." 

July  18.  In-Freight  bills  amounting  to  $95.60  were  paid  in  cash.  Charge  to  In- 
Freight. 

July  20.  91  more  pianos  have  been  finished  and  turned  over  to  the  stockroom, 
at  the  same  estimated  cost  as  before. 

July  31.     Sales  for  month,  $30000  cash. 

July  31.  Inventory  of  Materials  on  hand,  $14000.00.  Amount  due  workmen  for 
labor,  $2000.00,  $400.00  of  which  is  chargeable  to  Materials  Expense.  Close  Materials, 
Materials  Expense,  and  Manufacturing  Labor  into  Production. 

July  31.  Note  that  the  Production  account  does  not  evenly  balance.  Theoretically,  it 
should  balance  exactly,  as  its  debit  side  is  presumed  to  show  exact  cost  of  manufacture, 
and  its  credit  side  is  presumed  to  show  the  exact  output  at  cost.  But  for  the  reasons 
above  enumerated  there  is  a  slight  discrepancy  which  shows  as  a  gain.  Close  this  to  the 
Pianos  account. 

July  31.  Inventory  of  pianos  on  hand,  $104000.00.  Open  a  Loss  &  Gain  account 
and  close  the  Pianos  account  into  it.  Close  the  In-Freight  account. 

Close  Loss  &  Gain. 

questions: 

What  was  the  amount  of  net  assets  on  July  1? 
What  was  the  amount  of  net  assets  on  July  31? 
Was  there  an  increase  of  net  assets  during  July? 
Does  this  increase  agree  with  the  net  gain  for  July? 

Transactions — Continued 

May  8.  Received  an  order  from  J.  C.  Houston,  Peoria,  111.,  for  8  No.  E30  corn 
planters,  at  $38.50,  less  25%;  and  20  sulky  gang  plows  at  $45.00.  Billed  the  goods  to 
him  at  2/10  or  note  30  days,  shipping  via  C.  &  A.  Freight  charges,  paid  by  us,  $23.50. 

Make  out  a  voucher  for  the  freight;  detach  and  file  it.     Charge  Out-Freight. 

May  8.  Bought  of  Robert  Law,  on  account,  19  tons  Hocking  Lump  eoal  at  $5.00. 
The  bill  is  payable  June  1.     Charge  Manufacturing  Expense. 

May  8.  Paid  from  the  Petty  Cash  fund  for  100  20  postage  stamps.  This  is  charge- 
able to  General  Expense. 

No  voucher  is  required  for  this  transaction.  Make  an  entry  on  the  credit  side  of 
the  Petty  Cash  Book,  debiting  General  Expense.  Write  the  amount  and  the  name  of 
the  account  to  be  debited  in  the  Sundry  Accounts  Dr.  columns.     It  is  to  be  posted. 

May  9.  Bought  of  D.  C.  Wade  12£  M  ft.  oak  lumber  at  $80.00.  His  invoice  was 
dated  May  7.     Terms  2/10  n/30. 

May  10.  Sold  to  G.  W.  Hurd,  Racine,  Wis.,  16  No.  237  corn  planters,  at  $38.00 
less  25%;  and  20  shovel  plows  at  $2.62£.  Terms  2/10  n/30.  Trade  discount  of  20% 
on  entire  bill.     Freight  expense  to  be  borne  by  the  purchaser. 

May  10.  Filled  an  order  for  30  No.  E31  corn  planters,  at  $39.50,  less  16§%;  and 
9  double  harrows,  at  $10.00,  for  S.  F.  Lancey,  St.  Paul,  Minn.  Trade  discount  of  10% 
on  entire  bill.     Terms  2/10. 


BOOKKEEPING  39 

May  11.  Acting  upon  authority  of  the  directors,  we  have  today  installed  a  new 
Corliss  Engine  and  additional  machinery,  at  a  total  cost  of  $12460.00,  for  which  we  have 
paid  the  International  Machinery  Co.,  Detroit,  Mich.,  in  cash.  Make  out  a  voucher. 
Make  an  entry  in  the  Vouchers  Payable  Register,  charging  Tools  &  Machinery.  Make 
a  Cash  Book  entry. 

Note. — In  case  of  a  special  purchase  as  above  (and  as  in  the  purchase  on  May  1  of  Critchell  & 
Whitney)  when  the  purchase  is  large  and  the  items  numerous,  it  is  not  practicable  to  list  the  items 
of  the  purchase  on  the  voucher.  Such  large  transactions  are  often  evidenced  by  a  special  written 
contract  (or  if  real  estate,  by  a  deed)  and  a  reference  to  this  contract  or  deed  is  all  that  is  necessary 
on  the  voucher. 

May  11.  The  superintendent  of  the  factory  finds  that  the  supply  of  a  certain  kind 
of  varnish  is  exhausted,  and  that  he  needs  some  at  once.  He  buys  a  gallon  can  of  it  at 
a  local  establishment  for  65c1  which  is  paid  from  the  petty  cash  fund.     (Charge  Materials.) 

Enter  the  amount  in  the  Materials  column  of  the  Petty  Cash  Book.  Place  a  check 
mark  in  the  L.  F.  column,  as  the  Materials  column  will  be  posted  in  total. 

May  11.  Cash  sales  are  reported  today  amounting  to  $935.60.  Enter  in  the  Cash 
Book  and  in  the  Sales  Book.     Place  a  check  mark  in  the  L.  F   column  in  each  book. 

May  11.  This  week's  payroll  calls  for  $125.60  for  the  regular  force  and  $43.50  for 
piece-work  done  by  extra  help.  This  is  distributed  as  follows:  Materials  Expense, 
$20.00;  General  Expense,  $10.00;  Manufacturing  Labor,  the  rest. 

May  13.  Inspect  your  Vouchers  Payable  Register.  You  will  find  two  bills  due 
today  (One  of  these  is  marked  as  due  May  12,  but  as  the  12th  was  Sunday  the  bill  may 
be  paid  today).  It  will  be  observed  that  both  of  these  amounts  are  due  to  firms  in  the 
city.  Had  either  of  them  been  due  to  a  firm  outside  of  the  city,  it  would  have  been  neces- 
sary to  remit  a  day  or  two  in  advance,  so  that  the  money  might  arrive  in  time  to  entitle 
us  to  the  discount.  Detach  the  two  vouchers  and  pay  them,  entering  the  date  of  pay- 
ment on  the  voucher  stub.  Make  proper  entries  in  the  Cash  Book.  Mark  the  vouchers 
"paid"  in  the  Vouchers  Payable  Register.     Do  not  forget  to  take  the  discounts. 

May  13.  Received  cash  from  J.  C.  Houston  for  the  bill  of  goods  sold  him  May  3, 
less  2%  cash  discount. 

May  13.  The  directors  have  issued  a  call  for  a  second  installment  of  25%  of  the 
stock   subscription.     Prepare   Installment   List   No.    2. 

May  13.  All  stockholders  appear  today  with  cash  for  the  amount  of  their  install- 
ments. Issue  Installment  Receipts  to  them.  Remember  that  the  vice-President  must 
sign  the  receipts  issued  to  J.  E.  Colby  and  C.  J.  Barber.  Post  from  the  stubs  of  the  receipts 
to  the  credit  of  the  several  stockholders  in  the  Installment  Ledger. 

Make  the  entry  in  the  Cash  Book,  crediting  Subscription. 

May  14.  While  the  corporation  was  being  organized  Mr.  J.  E.  Colby  advanced 
cash  for  the  fees  paid  to  the  State  and  the  County,  and  to  A.  R.  Shannon,  corporation 
attorney,  for  advice.  The  total  amount  paid  out  by  Mr.  Colby  was  $250.00.  The  direct- 
ors ordered  that  he  be  reimbursed.  Make  out  a  voucher  and  pay  him  in  cash.  Charge 
General  Expense. 

May  15.  The  superintendent  of  the  factory  summarily  discharged  Herman  Wilke. 
Wilke's  salary  for  1\  days,  $3.13,  was  paid  out  of  the  petty  cash  fund  and  charged  to 
Manufacturing  Labor.  Enter  the  amount  in  the  special  column  and  check  in  the  L.  F. 
column. 


40  BOOKKEEPING 

May  15.     Cash  sales  were  reported  amounting  to  $420.00. 

May  16.  Warren  &  Co.  of  Muscatine,  Iowa,  remitted  Chicago  exchange  in  pay- 
ment of  our  bill  against  them  for  implements  purchased  May  6,  less  2%  cash  discount. 

May  16.  Inspect  your  Vouchers  Payable  Register.  If  there  is  a  bill  due  today, 
pay  it,  taking  any  discount  to  which  we  are  entitled. 

May  17.     Paid  D.  C.  Wade  the  net  amount  due  him  (See  Vouchers  Payable  Register). 

May  17.  Received  cash  from  F.  E.  Durrell,  Quincy,  111.,  for  bill  of  May  7,  less 
discount. 

May  18.  Bought  sundry  small  items  of  stationery  and  supplies  for  the  office,  $3.65; 
and  stamps,  $4.00;  which  amounts  are  charged  to  General  Expense  through  the  Petty 
Cash  Book. 

May  18.  J.  C.  Houston  sent  us  his  non-interest-bearing  60-day  note  dated  May 
8  for  the  full  amount  of  our  bill  against  him  of  May  8.  We  discounted  this  note  at  the 
bank  at  7%. 

Credit  Houston  through  the  Journal. 

Make  the  second  entry  also  in  the  Journal,  debiting  Cash  and  Interest  &  Discount, 
and  crediting  Notes  Receivable.  Post  the  cash  item  to  the  Cash  Book  immediately, 
entering  folios  in  both  books. 

Note.     The  reason  the  last  transaction  was  not  entered  in  the  Cash  Book  direct  is  that  the  discount 
item,  not  being  a  cash  discount  item,  could  not  be  entered  in  the  Cash  Discount  column;  nor  could  it  be 
entered  in  the  General  column  on  the  credit  side,  from  which  it  might  have  been  posted  to  the  debit  of 
Interest  &  Discount,  because  the  total  of  the  General  column  is  to  be  posted  to  the  debit  of  Vouchers 
Payable. 

May  18.  J.  L.  Cashel,  of  LaCrosse,  Wis.,  remitted  $185.22  in  payment  of  his  bill 
of  May  3  less  2%,  accompanied  by  a  letter  explaining  that  he  was  out  of  town  on  May  13, 
the  due  date,  and  expressing  the  hope  that  we  would  overlook  the  delay.  We  answered 
his  letter  courteously  refusing  to  allow  him  the  discount.  We  returned  his  check,  as  the 
terms  of  the  sale  allowed  until  June  2  in  which  to  pay  the  bill  at  the  net  price. 

May  18.  The  payroll  for  the  week  showed  a  total  of  $165.20,  distributed  as  follows: 
Materials  Expense,  $20.00;  General  Expense,  $12.50;  Manufacturing  Labor,  the  rest. 

May  18.  The  stenographer's  salary  for  the  week,  $12.50,  was  paid,  and  charged 
to  General  Expense. 

May  18.  The  superintendent  of  the  factory  reported  that  implements  to  the  cost 
value  of  $2169.50  had  been  delivered  to  the  sales  department. 

At  this  point  you  will  post  all  transactions  up  to  date  and  take  a  trial  balance.  Per- 
form the  work  in  the  following  order. 

Post  the  journal. 

Post  the  items  of  the  Sales  Book  to  the  Sales  Ledger,  using  the  explanation  "Imple- 
ments."    Do  not  post  the  total,  but  remember  to  include  it  in  the  trial  balance. 

Post  the  items  on  the  debit  of  the  Cash  Book  to  the  credit  of  the  various  accounts 
named.  Post  the  footings  of  the  Cash  Discount  Dr.  column  and  the  Cash  Discount  Cr. 
column  to  the  accounts  named  on  their  respective  headings.  Do  not  add  these  totals 
into  the  General  columns.  Post  the  totals  of  both  credit  columns  to  the  debit  of  Vouchers 
Payable.     Remember  to  include  the  balance  of  cash  in  the  trial  balance. 

Post  the  total  of  the  Vouchers  Payable  Register  to  the  credit  of  Vouchers  Payable, 
and  post  the  items  in  the  Sundries  column  to  the  debit  of  the  various  accounts  named, 


BOOKKEEPING  41 

using  the  Explanation  "Voucher  No.  — ."     Post  the  totals  of  the  Materials  and  Manu- 
facturing Labor  columns  to  the  debit  of  those  accounts. 

Note.     Much  labor  may  be  saved  by  ruling  up  personal  accounts  wherever  they  balance. 

Note.  At  this  point  you  may  test  the  accuracy  of  the  Vouchers  Payable  Register  by  ascertaining 
whether  the  total  of  outstanding  bills  as  shown  therein  agrees  with  the  balance  of  the  Vouchers  Payable 
account  as  it  now  stands  in  the  ledger. 

Post  the  items  in  the  Sundries  column  on  the  credit  side  of  the  Petty  Cash  Book 
to  the  debit  of  the  several  accounts  named.  Post  the  totals  of  the  Materials  and  Manu- 
facturing Labor  columns  to  the  debit  of  those  accounts.  The  items  on  the  debit  side  of 
the  Petty  Cash  Book  are  all  already  post-checked.  Close  the  Petty  Cash  Book.  Do 
not  forget  to  include  petty  cash  in  the  trial  balance. 

Make  a  list  of  Installment  Ledger  balances  and  see  if  its  total  agrees  with  the  bal- 
ance of  its  controlling  account,  Subscription.     Take  a  trial  balance. 

Transactions  for  May,  Continued. 

May  20.  Sold  to  Wilkins  &  Freeman,  Paxton,  111.,  9  No.  47  spring  tooth  harrows, 
at  $12.50;  12  No.  043  peg  tooth  harrows,  at  $9.50;  and  7.  No.  B26  riding  cultivators  at 
$25.00.  Terms  2/10  n/30.  We  paid  the  freight  on  this  shipment,  $16.25.  Shipped 
via  111.  Cent.   R.  R. 

May  20.  Received  checks  from  G.  W.  Hurd  and  S.  F.  Lancey  for  the  net  amounts 
due  us  for  implements  sold  them  on  May  10. 

May  20.  Bought  pens,  ink,  and  other  office  supplies,  and  paid  for  them  from  the 
petty  cash  fund,  $2.25. 

May  21.  Shipped  via  the  C.  &  A.  R.  R.  to  the  Dalton  Implement  Co.,  Jackson- 
ville, 111.,  June  1  dating,  terms  2/10  n/30,  8  No.  278  potato  diggers,  $18.50;  4  No.  049 
disc  harrows,  at  $23.75;  15  No.  01  cultivators,  at  $17.00.  Less  10%  on  entire  bill.  We 
paid  the  freight  charges  in  advance  for  them,  $16.65,  and  charged  them  with  the  amount. 

May  21.  Inserted  want  ads  in  three  daily  papers,  advertising  for  workmen.  Paid 
$2.70  for  these  ads,  from  the  petty  cash  fund.     Charge  Advertising. 

May  21.  The  petty  cash  fund  is  now  rather  low.  Make  out  a  voucher  and  secure 
$20.00  more  for  this  fund.  Post  at  once  from  the  Vouchers  Payable  Register  to  the  Petty 
Cash  Book. 

May  22.  Received  from  the  Southern  Pine  Lumber  Co.,  Rock  Island,  111.,  a  bill 
for  2400  ft.  No.  2  white  pine,  rough,  at  $20.25,  4800  ft.  No.  1  do.,  at  $24.00,  and  2000  ft. 
hickory,  at  $35.00.  (Price  varies  on  last  item  only.)  The  bill  was  dated  May  18,  terms 
"2/10  n/60,  freight  charges  allowed,"  and  we  were  advised  that  the  lumber  was  shipped 
on  May  18  via  the  C.  M.  &  St.  P.  Ry.  It  had  not  yet  arrived,  but  the  entry  was  made  at 
this  time  nevertheless. 

May  23.  Sold  to  Warren  &  Co.,  Muscatine,  Iowa,  10  Corn  King  disc  harrows,  at 
$21.75;  and  13  No.  03  cultivators,  at  $12.50.  Terms  2/10  1/20  n/30.  Warren  &  Co. 
to  pay  the  freight  charges.     Shipped  via  the  C.  B.  &  Q.  R.  R. 

May  23.     Bought  postage  stamps,  $2.00,  for  general  use,  paying  from  petty  cash  fund. 

May  23.  Sent  out  10000  ^circulars  today  under  one  cent  postage.  Paid  cash  for 
the  stamps.  Bought  the  envelopes  on  account  of  Homer  E.  Wadsworth,  290  Dearborn 
Ave.,  at  $1.85  per  M.  W.  P.  Dunn  &  Co.,  373  LaSalle  St.,  charged  us  on  account  $26.50 
for  paper  and  printing.  Make  out  separate  vouchers  for  the  three  bills.  Charge  Adver- 
tising in  all  three  cases. 


42  BOOKKEEPING 

May  24.  Received  the  lumber  from  Rock  Island  today.  Paid  the  C.  M.  &  St.  P.  Ry. 
freight  agent  $10.50  for  freight,  which  amount  we  will  deduct  when  we  pay  the  bill  for 
the  lumber. 

Make  out  a  voucher  for  this  payment.  Enter  the  transaction  in  the  Vouchers  Payable  Register, 
charging  the  $10.50  to  the  Southern  Pine  Lumber  Co.  in  the  General  Ledger.  Write  in  the  How  Paid 
column  opposite  Voucher  No.  28,  in  the  Vouchers  Payable  Register,  the  words  "Deduct  $10.50  freight." 

Voucher  No.  28,  which  shows  the  amount  due  the  Southern  Pine  Lumber  Co.  on  the  bill,  is  still  at- 
tached to  its  stub.  Deduct  $10.50  from  the  amount  shown  on  the  voucher,  with  a  proper  explanation 
dated  May  24.     Make  the  same  deduction  on  the  stub  of  the  voucher. 

Make  an  entry  in  the  Cash  Book. 

May  24.  Sold  to  G.  W.  Hurd  50  No.  2765  one-horse  seeders,  at  $15.60,  less  20%. 
Terms  2/10  n/Oct.  1.     Goods  were  shipped  charges  collect. 

May  25.  Sold  to  S.  F.  Lancey  4  land  rollers,  at  $22.50;  12  Zigzag  14-tooth  culti- 
vators, at  $18.75;  and  10  dozen  rolls  binder  twine,  at  $2.75  per  doz.  Terms,  2/10  n/30. 
Shipped  via  C.  M.  &  St.  P.  R.  R.     Paid  freight  charges,  $19.50. 

May  25.  The  factory  superintendent  employed  a  special  workman  to  assist  on  a 
rush  order.  Paid  this  workman  for  a  day  and  a  half  at  a  dollar  and  a  half  a  day,  from 
the  petty  cash  fund.  Charge  Manufacturing  Labor.  Twenty-five  cents  worth  of  putty 
was  also  paid  for  from  the  petty  cash  fund.     Charge  Materials. 

May  25.  Paid  T.  D.  Phillips,  Rock  Island,  111.,  the  net  amount  due  him.  (See 
Vouchers  Payable  Register.) 

May  25.  The  directors  have  issued  a  call  for  a  final  installment  of  25%  on  the  capi- 
tal stock.  Prepare  an  Installment  List.  J.  E.  Colby,  C.  J.  Barber,  and  R.  E.  McCarthy 
respond  at  once  with  a  cash  payment.  Issue  installment  receipts  to  them.  Post  from 
the  receipt  stubs  to  the  Installment  Ledger.  Close  the  three  Installment  Ledger  accounts 
which  are  now  fully  paid.     Make  the  entry  in  the  Cash  Book. 

May  25.  The  payroll  for  the  week  amounted  to  $179.60,  distributed  as  follows: 
General   Expense,   $10.00;   Materials  Expense    $15.00;   Manufacturing  Labor,  the  rest. 

May  25.     Paid  the  office  stenographer's  salary  as  on  previous  Saturdays. 

May  27.  Sold  to  E.  A.  Robinson  &  Bro.,  Champaign,  111.,  8  Self-Dump  hay  rakes, 
at  $20.50;  10  No.  B290  one-horse  mowers,  at  $38.25;  and  4  Junior  hay  stackers,  at  $41.50. 
Shipped  via  Illinois  Central  R.  R.  Terms  5/10  n/Oct.  1,  freight  charges  equalized  with 
nearest  shipping  point. 

Note.  The  "nearest  shipping  point"  is  in  this  case  Peoria.  Robinson  &  Bro.  ca/i  buy  any  imple- 
ment manufactured,  at  Peoria.  We  must  not  only  meet  Peoria  prices,  but  must  compete  with  Peoria 
freight  rates  as  well.  We  do  this  by  agreeing  to  pay  all  freight  charges  in  excess  of  what  the  freight  from 
Peoria  would  have  been.     This  is  called  "equalizing  freight  with  Peoria." 

May  27.  H.  M.  Miller  and  W.  L.  Sampson  remit  cash  for  the  final  installment  on 
their  stock  and  interest  for  two  days. 

May  27.  Bought  of  The  Lincoln  Foundry  Co.,  Lincoln,  111.,  19875#  steel  castings 
at  4#;  and  5857#  bar  steel  at  3£c\     Terms,  net  30  days.     Freight  charges  paid  by  them. 

May  27.  The  factory  superintendent  reports  finished  implements  turned  over  to 
the  sales  department  amounting  to  $2675.35. 

May  28.  Sold  to  S.  F.  Lancey,  St.  Paul,  Minn.,  12  No.  2  hay  tedders,  at  $33.75; 
9  side-sweep  hay  rakes,  at  $15.50;  and  1  gross  rolls  binder  twine,  at  $2.75  per  doz.  Terms 
June  15  dating,  5/10  n/Oct.  1.     Goods  were  shipped  F.O.B.Chicago. 


BOOKKEEPING 


43 


May  28.  Remitted  to  the  Southern  Pine  Lumber  Co.  the  net  amount  due  them 
after  deducting  for  freight  and  discount. 

Enter  in  the  General  column  on  the  credit  side  of  the  Cash  Book  an  amount  equal  to  the  sum  of  the 
net  cash  payment  and  the  freight  charges,  so  that  what  is  entered  in  the  Cash  Discount  Cr.  column  and 
what  is  entered  in  the  General  column  will  equal  the  amount  of  Voucher  No.  28,  as  entered  in  the  Vouch- 
ers Payable  Cr.  column  of  the  Vouchers  Payable  Register  on  May  22.  Then  make  a  contra  entry  on  the 
debit  side  of  the  Cash  Book  in  the  General  column,  crediting  the  Southern  Pine  Lumber  Co.  for  the  amount 
deducted  for  freight.  This  operates  as  a  reduction  of  the  amount  of  cash  paid  out,  and  when  posted  to 
the  ledger  will  offset  the  debit  of  the  Southern  Pine  Lumber  Co.  posted  from  the  Vouchers  Payable  Reg- 
ister (Voucher  No.  32).     Freight  must  be  deducted  before  discount  is  figured. 

Note.  It  is  the  custom  in  the  lumber  business  to  allow  a  discount  only  on  the  net  amount  after 
freight  allowances  are  deducted.  This  custom  does  not  exist  in  the  implement  business,  and  we  allow 
our  customers  to  discount  the  entire  bill,  deducting  amounts  advanced  for  freight  after  the  discount  has 
been  taken  on  the  entire  bill. 

May  28.  Received  from  A.  F.  Harvey  a  check  for  the  amount  due  on  his  final  install- 
ment and  interest.     Issue  an  Installment  Receipt 

May  28.  Messrs.  Colby,  Miller,  and  Barber  surrender  their  installment  receipts, 
endorsed  in  blank,  and  request  certificates  of  stock  in  exchange  therefor.  Write  across 
the  face  of  each  installment  receipt  in  red  ink  the  words  "Surrendered  May  28  in  part 
exchange  for  Stock  Certificate  No.  — "  and  have  this  cancellation  signed  by  the  secre- 
tary. Paste  the  cancelled  receipts  back  on  the  original  stubs  and  write  the  same  cancella- 
tion on  the  stubs  that  was  written  on  the  receipts.  Fill  out  Certificates  of  Stock  and 
the  stubs  as  shown  in  the  form  on  page  9,  detach  them,  and  deliver  them  to  the  proper 
parties.  Be  sure  to  have  the  stockholders  acknowledge  receipt  of  the  certificates  by 
placing  their  signatures  in  the  proper  space  on  the  certificate  stub. 

Note.     Your  teacher  will  instruct  you  as  to  who  will  affix  these  signatures. 

Note  that  the  transfer  record  is  not  filled  out  entirely  in  the  form  on  page  9.  These 
are  only  filled  when  new  stock  is  issued  in  transfer  for  old  stock. 

Post  from  the  stubs  of  the  certificate  book  to  the  credit  of  the  subscribers  in  the 
Stock  Ledger.  The  form  of  a  stock  ledger  account  is  shown  below.  Before  posting, 
write  the  headings  as  shown  in  the  form.  Note  that  one  account  occupies  but  half  the 
width  of  a  page. 

H.  M.  MILLER 


Date 

Debits 

Credits 

Credit  Bal. 

Cert.  No. 

No.  Shares 

Cert.  No. 

No.  Shares 

19 

May 

June 

28 

27 
27 

12 
13 

35 
165 

2 
13 

200 
165 

20000 
16500 
16500 

Note.  The  plan  of  posting  direct  from  the  stubs  of  the  stock  certificates  is  satisfactory  for  a  small 
corporation  with  few  stockholders,  and  the  Acme  Manufacturing  Co.  keeps  its  records  in  this  way.  A 
corporation  having  many  shareholders  and  frequent  transfers  of  stock,  however,  might  keep  a  Stock  Reg- 
ister similar  in  form  and  use  to  the  form  shown  at  the  top  of  page  44. 


44 


BOOKKEEPING 

STOCK  REGISTER 


C'rt. 

Date 

To  Whom  Issued 

Address 

Old 
C'rt. 
No. 

No. 
Shares 

L.F. 

Transferred  to 

No. 

Issued 

Cert.  No. 

L.F. 

Amount 

1 

Jan. 

1 

G.  W.  Brown 

Peoria,  111. 

200 

1 

20000 

2 

Jan. 

1 

R.  H.  Price 

Aurora,  III. 

150 

1 

15000 

17 

1 

15000 

3 

Jan. 

1 

T.  R.  Hoffman 

Hammond,  Ind. 

100 

1 

10000 

21&22 

1 

10000 

17 

Feb. 

15 

E.  T.  Buffin 

Austin,  111. 

2 

'150 

4 

15000 

21 

Mar. 

10 

Jas.  T.  Perry 

Gary,  Ind. 

3 

40 

6 

4000 

22 

Mar. 

10 

T.  R.  Hoffman 

Hammond,  Ind. 

3 

60 

1 

6000 

Frequently  a  more  complex  form  is  used  than  that  shown  above.  It  is  sometimes 
called  a  "transfer  register." 

Explanation  of  Above  Form.  The  first  three  entries  are  of  original  issues  of  stock. 
At  the  time  of  issuing  the  transfer  columns  were  left  blank.  Posting  to  the  Stock  Ledger 
was  done  from  this  register  instead  of  from  the  certificate  stubs. 

On  Feb.  15  R.  H.  Price  sold  his  150  shares  to  E.  T.  Buffin.  The  transfer  columns 
were  filled  out  opposite  certificate  No.  2,  and  $15000.00  posted  therefrom  to  the  debit 
of  R.  H.  Price's  account  in  the  Stock  Ledger.  Certificate  No.  17  was  issued  to  E.  T. 
Buffin  in  exchange  for  old  certificate  No.  2. 

On  Mar.  10  T.  R.  Hoffman  sold  40  shares  to  Jas.  T.  Perry.  Old  certificate  No.  3 
was  cancelled  and  the  transfer  columns  filled  in  in  the  register.  Two  new  certificates  were 
issued,  No.  21  to  Jas.  T.  Perry  for  40  shares,  and  No.  22  to  T.  R.  Hoffman  for  60  shares. 

May  28.  Another  workman,  Henry  Clark,  was  summarily  discharged  today  and 
paid  off  from  the  petty  cash  fund,  $3.75. 

May  29.     Cash  sales  were  reported  today  amounting  to  $261.75. 

May  29.  Sold  to  Marc  Lombard  &  Co.,  Winona,  Minn.,  9  land  rollers,  at  $20.00; 
8  No.  3  gang  plows  at  $38.75;  and  6  dozen  rolls  binder  twine,  at  $2.75.  Terms,  2/10 
n/Oct.  1,  5%  trade  discount  on  entire  bill.     The  buyers  to  bear  the  freight  expense. 

May  30.     Paid  350  from  the  petty  cash  fund  for  library  paste. 

May  30.  Messrs.  McCarthy,  Sampson  and  Harvey  surrendered  their  installment 
receipts,  properly  endorsed,  in  exchange  for  their  stock  certificates.     Proceed  as  on  May  28 

All  the  capital  stock  has  now  been  issued.  See  whether  the  total  of  credits  in  the 
Stock  Ledger  equals  the  amount  of  capital  stock  as  per  the  General  Ledger. 

May  30.     Received  cash  of  Wilkins  &  Freeman  for  our  bill  against  them  dated  May  20 

May  31.     Mailed  a  check  to  Robert  Law  for  two  bills  for  coal  this  month. 

May  31.  Paid  office  salaries  for  the  month  as  follows:  J.  E.  Colby,  President, 
$200.00;  C.  J.  Barber,  Secy.  &  Treas.,  $100.00;  Yourself,  Bookkeeper,  $75.00;  A.  C.  Owings, 
Salesman,  $90.00.  Charge  all  these  salaries  to  General  Expense.  Issue  a  separate  voucher 
for  each. 

Post  the  journal.  Post  the  unposted  items  in  the  Sales  Book  to  the  Sales  Ledger, 
and  post  the  total  for  May  to  the  Sales  account  in  the  General  Ledger. 

Post  the  items  on  the  debit  side  of  the  Cash  Book  to  the  credit  of  the  proper  accounts. 
In  posting  to  the  credit  of  sales  accounts,  post  both  the  discount  and  the  net  payment, 


BOOKKEEPING  45 

entering  them  on  the  same  line  with  the  bill  which  they  cover.  Post  the  total  of  the 
Cash  Discount  Dr.  column  to  the  debit  of  the  account  in  the  ledger  under  that  title.  Post 
the  total  of  the  Cash  Discount  Cr.  column  to  the  credit  of  Cash  Discount  Cr.  and  to  the 
debit  of  Vouchers  Payable.  Post  the  total  of  the  General  column  to  the  debit  of  Vouchers 
Payable.  Close  the  Cash  Book,  remembering  not  to  add  the  discount  columns  into  the 
general  columns. 

Post  to  the  debit  of  sundry  accounts  from  the  Vouchers  Payable  Register.  Post 
the  totals  of  the  Materials  column  and  the  Manufacturing  Labor  column  to  the  debit 
of  those  accounts  Post  the  total  of  the  Vouchers  Payable  Cr.  column  to  the  credit  of 
the  Vouchers  Payable  account.  Does  the  sum  of  unpaid  vouchers  equal  the  balance 
of  the  Vouchers  Payable  account? 

Post  to  the  debit  of  accounts  named  in  the  Sundry  column  of  the  Petty  Cash  Book. 
Post  the  footings  of  the  Materials  and  Manufacturing  Labor  columns. 

Rule  up  the  Subscription  account  in  the  General  Ledger,  as  it  now  balances. 

Take  a  trial  balance. 

Did  you  remember  to  include  cash  and  petty  cash  in  the  trial  balance?  After  your 
trial  balance  has  been  approved,  make  two  statements,  following  the  forms  shown  on 
pages  46  and  47.     Study  the  forms  now,  and  study  the  following  explanations: 

Explanation  op  the  Loss  and  Gain  Statement. 

Observe  that  the  gains  and  losses  are  highly  classified.  The  purpose  of  this  classi- 
fication is  to  group  under  main  accounts  the  subordinate  accounts  which  will  eventually 
close  into  them.  The  result  is  that  the  statement  shows  a  few  important  results  rather 
than  a  great  number  of  minor  results.  The  directors  can  examine  this  statement  easily 
and  intelligently  without  being  confused  by  a  mass  of  detail.  The  detailed  information 
is  all  there,  however,  shown  in  the  analysis  of  the  main  heads,  and  may  be  examined  by 
the  directors  if  they  are  so  disposed. 

To  illustrate:  The  Manufacturing  Labor,  Manufacturing  Expense,  Materials,  and  Materials  Expense 
are  all  subordinate  to  Production.  They  are  shown  as  subordinate  to  Production,  the  four  costs  being 
separately  ascertained  and  then  added  together  to  show  the  total  cost  of  production.  This  is  better  than 
a  plan  which  would  show  these  four  as  separate  items  of  loss. 

Observe  that  Cash  Discount  Dr.  (and  its  inventory)  and  Out-Freight  (and  its  inven- 
tory) are  shown  as  deductions  from  Sales  rather  than  as  separate  losses. 

Explanation  of  Statement  of  Resources  and  Liabilities. 

In  this  statement  the  resources  and  liabilities  are  shown  to  be  equal.  This  is  accom- 
plished by  including  the  Capital  Stock  and  the  Gain  as  liabilities,  as  these  represent  amounts 
due  the  investors. 

"Anticipated  cash  discounts"  and  "Anticipated  freight  allowance"  represent  amounts  which  cus- 
tomers will  deduct  in  paying  their  bills.  The  cash  discount  is  computed  accurately,  thus:  J.  L.  Cashel 
is  entitled  to  no  discount.  Warren  &  Co.,  G.  W.  Hurd  and  Marc  Lombard  &  Co.  are  entitled  to  2%.  The 
Dalton  Implement  Co.  is  entitled  to  2%  on  all  of  its  bill,  but  not  on  the  charge  against  them  for  freight 
advanced.  E.  A.  Robinson  &  Bro.  are  entitled  to  5%.  S.  F.  Lancey  is  entitled  to  2%  on  one  of  his  bills 
and  5%  on  the  other.  The  anticipated  freight  allowance  is  an  estimate  of  the  amount  due  Robinson 
&  Bro.  as  per  agreement  with  them  May  27.  The  anticipated  cash  discount  and  anticipated  freight  allow- 
ance are,  shown  in  the  statement  as  deductions  from  Accounts  Receivable,  rather  than  as  liabilities.  Had 
there  been  any  anticipated  cash  discounts  and  anticipated  freight  allowances  in  our  favor,  these  would 
have  been  treated  as  deductions  from  Vouchers  Payable,  not  as  resources. 


4G 


BOOKKEEPING 


Interest  &  Discount — 

Earnings 

Invty  May  31 

Invty  (Treasurer's  Report). 

Less 

Losses 

Invty  May  1 


Implements — 
Sales 


LOSS  &  GAIN  STATEMENT,  MAY  31,  19—. 

Gains 


**  ** 

** '  ** 

112! 50 

***** 

** 

*****  ** 


Cash  Discount  Dr 

Anticipated  Cash  Discount 

Out-Freight 

Anticipated  Out-Frt.  Allowance. 


Net  Sales 

Cost- 
On  hand  May  1 

Charged  for  production. 


** 

** 

*** 

** 

** 

** 

** 

** 

** 

**** 

** 

Deduct  Invty  May  31 

Net  cost  of  Impl.  sold. 


******* 
****  ** 


Production — 

Manufacturing  Labor. 
Due  workmen 


Less 
Labor  on  unfinished  Imp. 

Manufacturing  Expense . . 
Less  coal  on  hand 


Materials 

In -Freight  added. 


Less 

Cash  Discount  Cr ** .  ** 

Invty  Raw  Materials **** .  ** 

Invty  Unfinished  Materials *** .  ** 


Materials  Expense. 
Due  workmen 


*** 

** 

*** 

** 

*** 

** 

*** 

** 

*** 

** 

** 

**** 

** 

** 

** 

**** 

** 

**** 

** 

** 

** 

** 

** 

Total  cost  of  production . . 

Already  chgd.  off  to  Implements. . , 
Total  cost  of  production,  as  above. 


****** 
****' 


Depreciation  on  Factory  &  Site 

Depreciation  on  Tools  &  Machinery. 

Advertising 

General  Expense 

Add  Salary  due  Edna  Wilson.., 
Wages  due  workmen 


Net  Gain. 


Losses 


***  ** 

**  ** 

*  ** 

***** 

****** 

BOOKKEEPING 


47 


Cash- 


KESOTJRCES  &  LIABILITIES,  MAY  81,  19- 

Resources 


Per  Cash  Book 

Per  Petty  Cash  Book. 


******* 

**  **         ***** 


Notes  Receivable — 

G.  E.  Baker— Apr.  1... 
M.  L.  Rankin — Mar.  11 


Accounts  Receivable — 

J.  L.  Cashel *** 

Warren  &  Co *** 

G.  W.  Hurd *** 

S.  F.  Lancey *** 

Dalton  Implement  Co *** 

E.  A.  Robinson  &  Bro *** 

Marc  Lombard  &  Co *** 


Anticipated  Cash  Discounts . . 
Anticipated  freight  allowance. 


17.50 


Factory  &  Site 

Less  \%  depreciation. 


Tools  &  Machinery 

Less  £%  depreciation. 


Implements — Inventoried  at. . 
Coal  on  hand — Inventoried  at. 
Materials — Inventoried  at 


Unfinished  Implements — 
Labor  estimated  at . . . 
Materials  estimated  at. 


Interest — 

Accrued  on  Baker's  note — **ds 

Accrued  on  Rankin's  note — **ds 

Reported  by  Treas.  as  accrued  on  funds  in  bank 


***** 

****** 

***** 

**  ** 

******* 

***** 

***** 

******* 

4567.50 

50.75 

1247.88 

162 . 13 

262.74 

***** 

**  ** 

**  ** 

112.50 

***** 

Liabilities 

Salary  due  Edna  Wilson — 5  days 

Wages  due  workmen  on  this  week's  payroll — 

Gen'l  Expense 

Materials  Expense 

Manufacturing  Labor 

Vouchers  Payable — 

Critchell  &  Whitney 

Homer  E.  Wadsworth 

W.  P.  Dunn  &  Co 

The  Lincoln  Foundry  Co 

Capital  Stock 

Gains  for  May  (as  per  L.  &  G.  Stm't) 


8.33 

12.50 

114.50 


48  BOOKKEEPING 

Salary  due  Edna  Wilson  is  a  liability  inventory  on  the  General  Expense  account. 
In  the  outline  shown  for  this  statement  all  inventories  are  given  in  plain  figures  except 
those  you  have  been  told  how  to  estimate  for  yourself. 

After  reading  the  above  explanations  and  studying  the  forms  carefully,  you  should 
be  able  to  understand  the  two  statements.  Remember  that  all  inventories  used  in  mak- 
ing the  Resource  and  Liability  Statement  must  also  appear  on  the  Loss  and  Gain  State- 
ment. If  the  inventory  is  an  asset  or  decreases  a  liability,  it  must  appear  in  the  Loss 
and  Gain  Statement  as  either  an  increase  of  some  gain  item  or  a  diminution  of  some  loss 
item.  If  the  inventory  is  a  liability  or  decreases  an  asset,  then  it  must  appear  in  the 
Loss  and  Gain  Statement  as  an  increase  of  some  loss  item  or  a  decrease  of  some  gain  item. 
Reserves  from  Profits. 

The  directors, .  after  they  have  examined  your  statements  as  to  the  condition  and 
progress  of  the  business,  have  ordered  the  following  reservations:  Reserve  for  Depre- 
ciation, $450.00;  Reserve  for  Surplus,  $500.00.  They  also  declare  a  dividend  of  2%  to 
be  paid  in  cash  on  June  5. 

Referring  to  your  Loss  and  Gain  Statement,  proceed  to  close  the  loss  or  gain  accounts. 
Bring  down  all  inventories. 

1.  Close  In-Freight  and  Cash  Discount  Cr.  into  Materials. 

2.  Close  Materials,  Materials  Expense,  Manufacturing  Labor,  and  Manufacturing  Expense  into 
Production. 

3.  Close  Out-Freight  and  Cash  Discount  Dr.  into  Sales,  to  which  account  the  sales  total  has  already 
been  posted. 

4.  The  estimated  cost  of  production  has  already  been  charged  off  from  the  Production  account 
to  the  Implements  account  through  three  journal  entries.  The  actual  cost  of  production,  however,  is 
seen  to  be  less  than  the  estimated  cost.  A  saving  in  the  estimated  cost  of  manufacture  has  been  effected. 
This  saving  shows  in  the  Loss  and  Gain  Statement  as  a  gain.  Close  it  into  the  Implements  account.  Close 
Sales  to  Implements. 

5.  Close  Implements,  Advertising,  Interest  &  Discount,  and  General  Expense  into  Loss  &  Gain. 
In  closing  the  Implements  account,  the  gain  will  not  be  the  same  as  that  shown  by  the  Loss  and  Gain  State- 
ment, because  a  gain  of  $**.**  has  been  closed  from  Production  to  Implements. 

6.  Close  the  Loss  &  Gain  account  into  the  Undivided  Profits  account.  The  gain  closed  into  Undi- 
vided Profits  will  not  agree  with  the  gain  shown  by  tne  Loss  and  Gain  Statement,  as  your  Loss  and  Gain 
Statement  includes  $***.**  depreciation,  which  is  written  directly  off  of  the  Factory  &  Site  and  Tools 
&  Machinery  accounts  without  being  carried  through  the  Loss  &  Gain  account. 

Make  the  reservations  ordered  by  the  directors  by  crediting  each  of  the  reserve  accounts 
and  Dividend  No.  1  and  debiting  the  Undivided  Profits  account.  This  may  be  done 
directly  in  the  ledger,  by  means  of  three  closing  entries,  or  through  the  journal,  the  follow- 
ing entry  being  used: 

Undivided  Profits  $2950.00. 

Reserve  for  Depreciation  $  450.00 

Reserve  for  Surplus  500.00 

Dividend  No.  1  2000.00 

If  the  journal  entry  is  used  for  this  transaction,  post  it  at  once. 

Note.  The  creation  of  these  reserves  has  not  made  the  corporation  richer  or  poorer.  But  the  fact 
that  the  reserves  exist  materially  strengthens  the  standing  of  the  company  with  its  stockholders  and  with 
the  general  public.  The  creditors  know  that  $450.00  has  been  set  aside  to  guard  against  deterioration 
in  the  value  of  the  company's  property,  to  which  they  must  ultimately  look  for  satisfaction  of  claims  against 
the  corporation  in  case  of  insolvency.     Everyone  looks  with  approval  upon  a  large  and  growing  Surplus 


BOOKKEEPING  49 

reserve,  which  strengthens  the  financial  standing  of  the  company,  safeguards  the  interest  of  stockholder 
and  creditor,  and  is  an  indication  of  wise  and  conservative  management. 

Make  a  journal  entry  debiting  Reserve  for  Depreciation  and  crediting  Factory  & 
Site  and  Tools  &  Machinery  for  the  estimated  depreciation.  Post  this  entry  at  once. 
Close  the  Factory  &  Site  and  Tools  &  Machinery  accounts. 

Close  the  Undivided  Profits  account  with  a  balance,  which  you  will  bring  down. 

Take  a  Balance  of  Balances.  It  should  agree  in  every  detail  with  the  Statement 
of  Resources  &  Liabilities,  except  that  it  will  show  the  Gain  distributed  to  four  accounts, 
viz:  Reserve  for  Depreciation,  Reserve  for  Surplus,  Dividend  No.  1,  and  Undivided 
Profits. 


TRANSACTIONS  FOR  JUNE 

In  the  following  transactions,  full  instruction  is  given  for  procedure  in  cases  present- 
ing new  features  to  the  student.  For  most  of  the  transactions  of  this  month,  however, 
parallel  or  similar  transactions  can  be  found  in  the  work  for  May,  and  these  will  not  be 
again  explained.'  The  student  must  rely  upon  his  judgment  and  his  familiarity  with 
the  work  thus  far,  for  charging  the  various  expense  and  cost  accounts.  He  will  not  be 
told  what  account  to  charge  in  transactions  of  a  kind  with  which  he  should  be  familiar. 

June  1,  19—.  '  Insured  with  the  iEtna  Fire  Insurance  Company  as  follows:  $21375.00 
on  tools  and  machinery,  at  $1.07  per  hundred  for  3  years;  $12375.00  on  factory  and 
site,  at  $1.15  for  3  years;  and  a  three  year  policy  for  $4500.00  on  implements  and  mate- 
rials (including  unfinished  implements),  at  $1.35  per  hundred.  Paid  the  premiums  in 
cash. 

June  1.  Sold  Cameron  &  Cameron,  440  Lake  St.,  terms  5/30  n/Oct.  1,  6  B290  one- 
horse  mowers,  at  $38.25;  and  12  self-dump  hay  rakes,  at  $20.50. 

June  1.  The  payroll  for  the  week  amounted  to  $162.50,  divided  as  follows;  General 
Expense,  $12.50;  Materials  Expense,  $15.00;  Manufacturing  Labor,  the  rest. 

June  1.     Paid  the  stenographer's  salary  as  usual. 

June  3.     Paid  vouchers  No.  30  and  31. 

June  3.  Drew  at  sight  on  J.  L.  Cashel,  through  the  First  National  Bank  of  LaCrosse, 
Wis.,  for  the  amount  due  from  him.  The  bank  returned  the  amount  less  400  for  collec- 
tion charges.  Enter  the  transaction  in  the  Journal,  posting  the  cash  item  to  the  Cash 
Book  at  once  and  checking  in  both  books. 

June  3.  Received  from  Warren  &  Co.,  of  Muscatine,  Iowa,  and  from  G.  W.  Hurd, 
of  Racine,  Wis.,  cash  for  the  amounts  due  from  them.  The  bill  against  Warren  &  Co. 
was  due  June  2,  but  that  day  was  Sunday. 

June  4.  Remitted  to  trade  journals  as  follows,  for  advertising:  The  Implements 
Journal,  340  Wabash  Ave.,  City,  $50.00;  The  Agriculturist,  Detroit,  Mich.,  $45.00.  Two 
vouchers. 

June  4.  Sold  to  W.  F.  McKinney,  6321  Cottage  Grove  Ave.,  8  Self- Dump  hay  rakes, 
at  $20.50;  6  Junior  hay  stackers,  at  $45.00,  less  10%.     Terms,  5/30,  n/Oct.  1. 

June  4.     Received  of  S.  F.  Lancey  the  net  amount  due  from  him  today. 

June  5.  Paid  Dividend  No.  1  in  cash.  Prepare  Dividend  List  No.  1  in  the  follow- 
ing form: 


50 


BOOKKEEPING 


DIVIDEND  LIST  NO.  1,  JUNE  5,  19—. 

Acme  Manufacturing  Company,  2%. 


No.  of 
Cert. 

Shareholders 

1 
2 
3 
4 
5 
6 

J.  E.  Colby 
H.  M.  Miller 
C.  J.  Barber 
R.  E.  McCarthy 
W.  L.  Sampson 
A.  F.  Harvey 

No.  of 
Shares 

Par  Value  of 
Shares 

Amt.  of  Div. 

When  Paid 

200 

$20000 

$400 

200 

20000 

400 

200 

20000 

400 

150 

15000 

300 

150 

15000 

300 

100 

10000 

200 

1000 

100000 

2000 

Voucher 
No. 


Make  out  six  separate  vouchers.  Paid  cash  at  once  to  all  stockholders  except  Mr. 
Miller  who  is  away  on  his  vacation  and  has  given  instructions  that  his  dividend  be  held 
until  his  return.  Write  the  date,  June  5,  in  the  "When  Paid"  column  opposite  all  names 
in  the  list  except  that  of  Mr.  Miller,  and  opposite  each  date  record  the  number  of  the 
voucher  issued.  '  (Separate  vouchers  were  issued  so  that  separate  receipts  would  be  secured 
from  the  stockholders.)  The  account  charged  is  the  Dividend  No.  1  account.  Make 
one  Cash  Book  entry. 

June  5.  Bought  of  the  Sherwin-Williams  Paint  Co.,  1220  W.  Randolph  St.,  100 
gals  Best  E.  G  varnish,  at  $1.35;  and  45  50-lb.  kegs  No.  18  x  924  white  lead  at  40  per 
lb.     Terms,  2/20  n/60.     These  materials  were  for  use  in  manufacturing. 

June  6.  The  superintendent  of  the  factory  reported  that  finished  implements  had 
been  turned  to  over  the  sales  department  amounting  to  $2256.35,  at  estimated  cost. 

June  6.     Cash  sales  reported,  $557.20. 

June  6.  E.  A.  Robinson  &  Bro.  remitted  to  us  the  net  amount  due  on  our  invoice 
dated  May  27,  less  freight  charges  of  $17.35.  This  amount  was  our  share  of  the  freight 
charges,  as  agreed  (See  transaction  on  May  27).  In  computing  the  amount  due  they  first 
deducted  5%  of  the  entire  bill,  and  then  subtracted  $17.35  from  this  (See  second  note 
under  transaction  for  May  28). 


Credit  E.  A.  Robinson  &  Bro.  for  the  cash  and  discount  through  the  Cash  Book, 
the  Journal  for  the  amount  of  the  freight. 


Credit  them  through 


June  7.     Bought  100  20  stamps. 

June  7.  Bought  from  the  Lockett  Hardware  Co.,  171  Randolph  St.,  City,  terms 
1/15  n/30,  20  gr.  No.  8  f.-in.  iron  wood  screws,  at  $.92;  20  gr.  No.  10  J-in.  do.,  at  $1.15; 
10  kegs  lOd  wire  nails  at  $4.50;  and  4  kegs  6d  ninge  nails  at  $6.05. 

June  7.  Sold  to  the  Farmer's  Supply  Co.,  Watseka,  111.,  12  Junior  hay  stackers 
at  $43.50  less  5%;  and  12  B290  one-horse  mowers,  at  $42.50,  less  10%.  Terms,  2/10, 
n/Oct.  1. 

June  8.     Received  cash  of  Marc  Lombard  &  Co.,  for  bill  due  today  less  discount. 

June  8.  Sold  Wilkins  &  Freeman,  June  15  dating,  terms  2/10  n/Oct.  1,  8  No  4. 
gang  plows,  at  $57.50;  9  No.  2  hay  tedders,  at  $37.50  less  10%. 

June  8.     The  payroll  for  the  week  was  $169.50,  as  follows:     Materials  Expense, 


BOOKKEEPING  51 

$10.00;  Ceneral  Expense,  $12.50;  Manufacturing  Labor,  the  rest.     Paid  the  salary  of 
Edna  Wilson,  the  stenographer. 

June  10.  Martin  L.  Mills,  22  Rookery  Building,  City,  stepped  into  the  office  with 
a  certificate  for  150  shares  of  stock,  standing  on  our  books  in  the  name  of  R.  E.  McCarthy, 
which  shares  were  transferred  to  him.  (Your  teacher  will  sign  these  endorsements  or 
authorize  some  one  else  to  do  so.)  Mr.  Mills  wished  us  to  record  the  transfer  on  our  books 
so  that  he  might  vote  the  stock  and  be  entitled  to  the  dividends  thereon. 

Note.  Mr.  Mills  did  not  buy  this  stock  directly  from  Mr.  McCarthy.  When  Mr.  McCarthy  wished 
to  dispose  of  his  stock  he  endorsed  it  in  blank  and  delivered  it  to  a  stock  broker,  who  sold  it  for  him.  The 
man  to  whom  the  broker  made  the  sale  bought  it  for  purposes  of  speculation  and  did  not  require  the  broker 
to  deliver  the  actual  stock  to  him,  but  merely  took  the  broker's  receipt  for  the  money  paid.  The  following 
day  the  first  speculator  ordered  the  broker  to  sell  the  stock,  another  speculator  buying  it.  In  this  way 
the  stock  was  owned  by  several  speculators  in  quick  succession,  until  Mr.  Mills  bought  it.  Mr.  Mills  wished 
to  keep  the  stock,  vote  it,  and  draw  its  dividends.  He  therefore  required  the  broker  to  fill  in  his  name 
in  the  endorsement  of  the  certificate,  as  assignee  (the  endorsement  had  been  in  blank,  remember,  up  to 
this  time),  and  to  deliver  to  him  the  certificate  itself,  which  he  delivered  to  the  company  for  transfer. 

Note.  Installment  Receipts  may  be  transferred  by  endorsement  in  the  same  way  that  Stock  Cer- 
tificates are  transferred.  The  form  of  endorsement  used  will  of  course  differ,  as  the  assignor  can  only 
assign  his  rights  and  interest  in  the  stock  and  not  the  stock  itself;  and  for  the  further  reason  that  the 
assignor  cannot  transfer  to  the  assignee  his  obligation  on  unpaid  subscription.  These  conditions  are  often 
incorporated  in  the  form  of  endorsement. 

Make  out  a  new  Certificate  of  Stock  (Certificate  No.  7)  in  favor  of  Mr.  Mills  and  deliver 
it  to  him,  and  be  sure  to  fill  out  the  transfer  record  on  the  stub.  Post  from  the  stub  to 
the  credit  of  Martin  L.  Mills  and  from  the  transfer  record  to  the  debit  of  R  E.  McCarthy 
in  the  Stock  Ledger. 

Cancel  the  old  Certificate  by  writing  across  its  face  in  red  ink  the  words  "Cancelled 
June  10,  19 — ,  and  Certificate  No.  7  issued  in  exchange  to  Martin  L.  Mills."  Write  the 
same  cancellation  notice  on  the  stub.  The  Secretary  (your  teacher,  or  some  one  author- 
ized by  your  teacher)  must  sign  both  cancellations.  Paste  the  old  certificate  back  on 
its  stub. 

June  10.  Sold  to  Cameron  &  Cameron  8  Zigzag  14-tooth  cultivators  at  $20.00 
less  6^%;  and  12  land  rollers  at  $22.50,  less  10%.     June  15  dating.     Terms,  5/30  n/Oct.  1. 

Note.     We  offered  to  date  the  bill  ahead  as  an  inducement  for  them  to  place  the  order  at  once. 

Note.  Our  customary  terms  for  June  sales  are  5/30  n/Oct.  1.  Hereafter  these  terms  will  be  referred 
to  as  "Regular." 

June  11.     Paid  for  extra  help  in  the  factory,  from  the  petty  cash  fund,  $1.75. 

June  11.  Received  cash  from  the  Dalton  Implement  Co.  for  bill  due  today,  less 
discount,  and  plus  freight  advanced  by  us. 

June  11.  Sold  Marc  Lombard  &  Co.,  Winona,  Minn.,  on  a  June  15  dating,  12  No. 
9  side-hitch  sweep  rakes  at  $15.50  and  8  No.  4  gang  plows,  at  $57.50.  Terms  Regular. 
Shipped  via  C.  &  N.  W.  R.  R.  and  prepaid  freight,  $32.50. 

June  11.  Received  cash  from  Cameron  &  Cameron  for  the  net  amount  of  the  bill 
against  them  dated  June  1.  They  are  entitled  to  5%  cash  discount,  and  also  to  a  dis- 
count at  6%  for  the  twenty  days'  prepayment.  This  last  is  an  Interest  and  Discount  item 
and  should  be  handled  through  the  Journal.    In  posting,  enter  in  Cash  Discount  column. 

Note.  The  Interest  and  Discount  item  is  1/3  of  1%  of  the  amount  remaining  after  the  cash  dis- 
count is  deducted. 


52  BOOKKEEPING 

In  posting  to  Cameron  &  Cameron's  account  in  the  Sales  Ledger,  enter  the  net  cash  payment  in  the 
right  hand  credit  column  on  the  same  line  on  which  the  debit  is  entered.  In  the  left  hand  credit  column 
enter  both  the  cash  discount  and  the  Int.  &  Dis.  item,  on  the  same  line.  This  may  be  accomplished  by 
writing  both  items  in  small  figures,  one  above  the  other  in  the  same  space. 

Note.  Students  of  bookkeeping  as  a  general  rule  write  too  large  a  hand  and  make  large  and  sprawl- 
ing figures.  If  you  have  this  bad  habit,  overcome  it.  The  foregoing  entry  affords  you  an  opportunity 
to  practice  making  small  neat  figures. 

June  12.  Sold  to  F.  E.  Durrell,  Quincy,  111.,  on  our  regular  terms  and  with  a  June 
15  dating,  4  headers,  at  $82.50;  and  12  hand-dump  hay  rakes  at  $16.25.  Shipped  via 
C.  B.  &  Q.  freight  charges  collect. 

June  12.  Mailed  6000  advertising  circulars  under  10  postage.  Paid  cash  for  the 
stamps.  The  envelopes  were  sold  to  us  on  account  by  the  Wimberton  Paper  Co.  at  $1.32£. 
W.  P.  Dunn  &  Co.  charged  us  $28.00  for  the  circulars,  including  paper  and  printing.  Paid 
an  extra  stenographer  $2.00  a  thousand  from  the  petty  cash  fund  for  addressing  3000 
envelopes. 

June  13      Cash  sales  reported  $215.75. 

June  13.  Bought  of  the  United  States  Steel  Corporation  24100#  of  cast  steel  at 
3£0.  Terms  1/5,  n/30.  Goods  were  shipped  F.O.B.  Pittsburg,  via  Big  Four.  Freight 
charges,  $42.75. 

June  14.  Paid  $2.16  from  the  petty  cash  fund.  $1.00  of  this  was  for  office  supplies; 
the  rest  was  for  materials  used  in  the  factory  for  manufacture. 

June  14.  Sold  Warren  &  Co.,  F.O.B.  destination,  June  15  dating,  terms  Regular, 
2  grain  binders  on  trucks,  at  $85.00;  12  No.  B26  riding  cultivators  at  $25.00;  and  3  No. 
4  gang  plows  at  $57.50.     Prepaid  freight  via  C.  B.  &  Q.,  $23.60. 

June  14.  Received  of  W.  F.  McKinney  cash  for  the  net  amount  of  his  bill  of  June  4 
less  cash  discount,  and  less  discount  on  anticipated  payment.    (See  last  Trans.,  June  11.) 

June  15.  Bought  of  Weyerhauser  &  Co.,  Davenport,  Iowa,  23^  M.  ft.  of  ash  lumber 
at  $42.00.     Terms,   Note  30  days,   freight  allowed. 

Note.     Fill  out  a  voucher  and  make  the  record  in  the  Vouchers  Payable  Register  in  the  usual  way. 

The  lumber  arrived  today  via  the  C.  R.  I.  &  P.  R.  R.  and  we  paid  the  freight  charges, 
$26.65. 

Note.  Fill  out  a  voucher  and  make  a  record  in  the  Vouchers  Payable  Register  charging  Weyer- 
hauser &  Co.     Make  an  entry  in  the  Cash  Book. 

Gave  Weyerhauser  &  Co.  our  note  for  the  amount  due  them  after  deducting  freight 
charges. 

Make  an  entry  in  the  Journal,  debiting  Vouchers  Payable  for  the  amount  of  Voucher  No.  63,  and 
crediting  Notes  Payable  and  Weyerhauser  &  Co.  Mark  voucher  No.  63  "Paid  by  note  June  15,  19 — , 
less  $26.65  freight  charges"  in  the  Vouchers  Payable  Register  Show  the  deduction  on  the  voucher  and 
stub. 

June  15.  The  payroll  for  the  week  was  $171.00,  distributed  as  follows:  General 
Expense,  $10.00;  Materials  Expense,  $12.50;  Manufacturing  Labor,  the  rest. 

Paid  Edna  Wilson's  salary. 

June  17.  The  factory  superintendent  has  turned  over  to  the  sales  department 
finished  implements  the  cost  value  of  which  is  $3267.90. 

June  17.  Sold  to  J.  C.  Houston  6  Junior  hay  stackers,  at  $41.50;  12  Corn  King  disc 
harrows,  at  $21.75;  and  15  doz.  rolls  binder  twine,  at  $2.75.     Terms  Regular. 

Paid  freight  via  C.  P.  &  St.  L.,  $21.40,  which  amount  we  charged  to  J.  C.  Houston. 


BOOKKEEPING  53 

June  17.  Bought  of  Wm.  DeDckmann  &  Co.,  Duluth,  Minn.,  19500  ft.  2  x  6  x  30-in- 
oak  lumber,  at  $75.00;  and  20,000  ft.  2  x  8  x  36-in.  do.,  at  $75.00.  Freight  prepaid. 
Terms,  net  60  ds. 

June  17.     Received  in  cash  the  net  amount  due  from  the  Farmers'  Supply  Co. 

June  18.     W.  L.  Sampson  has  disposed  of  50  shares  of  his  stock  to  E.  G.  Meyers, 
1440  Monadnock  Bldg.,  City.     Mr.  Sampson  endorses  his  certificate  for  150  shares  as 
follows:     "For  value  received  I  hereby  sell,  transfer  and  assign  to 
E.  G    Meyers,  50  shares. 
W.  L.  Sampson,  100  shares, 
the  shares  of  stock  within  mentioned,  etc.,"  signing  the  endorsement.     We  cancel  the 
old  Certificate  and  issue  in  lieu  of  it  two  new  certificates,  No.  8  to  E.  G.  Meyers  for  50 
shares,  and  No.  9  to  W.  L.  Sampson  for  100  shares.     Cancel  the  old  Certificate,  using  a 
full  explanation  which  is  written  on  both  certificate  and  stub.     Paste  the  Certificate 
back  on  its  stub.     Deliver  the  new  certificates  to  the  proper  parties. 

Post  from  the  stubs  of  Certificates  8  and  9  to  the  Stock  Ledger.  Certificate  No.  9 
will  be  posted  to  both  the  debit  and  credit  of  Sampson. 

Note.  This  is  necessary  in  order  that  the  records  of  certificate  numbers  shall  be  full  and  complete 
in  the  Stock  Ledger.  The  debit  and  credit  may  be  written  on  the  same  line.  The  balance  of  Sampson's 
account  will  not  be  changed  by  the  posting  of  this  equal  debit  and  credit. 

June  18.     Paid  the  U.  S.    Steel  Corporation  for  the  invoice  due  today,  less  discount. 

June  19.  Discharged  Oliver  Barker,  a  workman,  today  and  paid  him  $2.25  from 
the  petty  cash  fund. 

If  there  is  not  $2.25  left  in  the  petty  cash  fund,  fill  out  a  voucher  for  $20.00  more 
to  be  used  for  petty  cash  disbursements. 

June  19.  Sold  W.  F.  McKinney,  6321  Cottage  Grove  Ave.,  8  out-throw  disc  harrows 
at  $21.25;  and  8  in-throw  disc  harrows  at  $19.50.     Terms  Regular. 

June  19.  Through  our  own  mistake,  the  lumber  bought  on  the  15th  was  not  cut 
to  the  proper  size  and  planed  for  our  use.  We  had  to  have  this  done  ourselves,  and  today 
had  the  work  done  by  the  South  Side  Planing  Mills  Co.  They  submitted  a  bill  for  $26.75 
for  the  work.     This  is  chargeable  to  Materials  Expense. 

June  20.  Sold  Cameron  &  Cameron,  on  Sept.  1  dating,  terms  Regular,  20  land 
rollers  at  $21.00  less  10%. 

June  20.  Sold  G.  W.  Hurd,  terms  Regular,  9  No.  2765  one-horse  seeders  at  $12.45 
and  12  bumper  disc  harrows  at  $20.50. 

Prepaid  the  freight  via  the  Michigan  Central,  $18.27. 

June  21.  Sold  to  S.  F.  Lancey  for  cash  less  2%  20  knife  grinders,  at  $3.50;  and  20 
doz.  rolls  binder  twine,  at  $2.75.  Shipped  the  goods  to  St.  Paul  via  C.  M.  &  St.  P.  R.  R. 
charges  collect,  but  with  the  understanding  that  Mr.  Lancey  was  to  deduct  the  amount 
of  the  freight  from  his  next  remittance. 

Note.  Mr.  Lancey  was  a  regular  customer  of  ours  and  we  desired  that  this  transaction  should  show 
in  his  ledger  account.  Therefore  we  charged  him  in  the  usual  way  through  the  Sales  Book  and  credited 
him  at  once  through  the  Cash  Book.  The  entry  in  the  Sales  Book  should  show  the  gross  amount  of  the 
bill.     The  terms  are  "Cash  less  2%.     Freight  allowed." 

June  21.  Bought  from  the  Southern  Pine  Lumber  Co.,  Rock  Island,  111.,  25740  ft. 
white  pine  lumber  at  $24.60  per  M.  Terms,  note  60  days,  freight  allowed.  The  note 
will  not  be  sent  to  them  until  we  receive  the  lumber  and  pay  the  freight  charges. 


54  BOOKKEEPING 

June  22.  The  payroll  for  the  week  was  $170.50,  as  follows:  General  Expense, 
$10.00;  Materials  Expense,  $12.50;  Manufacturing  Labor,  the  rest.  Paid  Miss  Wilson's 
salary. 

June  22.     Paid  the  Lockett  Hardware  Co's.  bill  of  June  7. 

June  22.  Sold  J.  L.  Cashel  for  spot  cash  10  No.  049  disc  harrows  at  $23.75,  and  2 
land  rollers  at  $20.00.     Prepaid  freight,  $17.65.     Shipped  by  C.  B.  &  Q. 

Note.  We  do  not.  wish  to  carry  an  account  with  Mr.  Cashel  any  longer.  Treat  this  as  a  cash  sale, 
in  the  usual  way. 

June  24.     C.  J.  Barber  has  sold  J.  E.  Colby  25  shares  of  his  stock. 

Note.  Mr.  Barber's  old  certificate  is  cancelled  and  two  new  ones  issued  in  its  place.  See  transac- 
tion on  June  18. 

June  24.  Sold  the  Dalton  Implement  Co.  on  our  regular  terms  4  one-horse  hay 
presses,  at  $127.50,  and  22  broadcast  seeders,  at  $15.00. 

Prepaid  freight  via  C.  &  A.  R.  R.,  $34.02,  and  charged  the  freight  to  them. 

June  24.  Mr.  Miller  having  returned,  his  dividend  No.  1  was  paid  to  him  in  cash. 
A  voucher  has  already  been  issued  for  this  dividend. 

June  24.  The  lumber  bought  of  the  Southern  Pine  Lumber  Co.  arrived  via  the 
C.  R.  I.  &  P.  today.     We  paid  the  bill,  $32.16,  charging  the  Southern  Pine  Lumber  Co. 

June  24.  Sent  to  the  Southern  Pine  Lumber  Co.  our  60-day  note  for  the  amount 
due  for  lumber  bought  June  21,  after  deducting  the  freight  charges.    Date  of  note,  June  21. 

Mark  the  voucher  issued  on  June  21  "Paid  by  note  June  24,  less  freight,  $32.16," 
and  make  the  same  notation  in  the  Vouchers  Payable  Register.  Make  a  journal  entry 
debiting  Vouchers  Payable  and  crediting  Notes  Payable  and  Southern  Pine  Lumber  Co. 

June  25.  Paid  cash  from  the  petty  cash  fund  for  one  dozen  lead  pencils  for  the 
office,  450. 

June  25.     Discounted  the  Sherwin-Williams  Paint  Co's  bill  of  June  5. 

June  25.  Received  checks  today  from  the  following  firms  for  bills  dated  June  15: 
Cameron  &  Cameron,  Marc  Lombard  &  Co.,  F.  E.  Durrell,  and  Warren  &  Co.  These  are 
all  anticipated  payments. 

Wilkins  &  Freeman,  who  owned  for  Mdse  purchased  June  15,  failed  and  went  into 
the  hands  of  a  receiver.  We  filed  our  affidavit  of  claim  with  the  receiver.  Paid  notary 
public  for  taking  acknowledgment  of  the  affidavit,  250  from  the  petty  cash  fund. 

June  26.  The  factory  superintendent  reports  finished  implements  amounting  to 
$2726.58. 

June  26.     Paid  the  Lincoln  Foundry  Co.  the  net  amount  due  them  today. 

June  26.  Bought  of  McNeil  and  Jones,  4658  Lincoln  Ave.,  terms  2%  for  cash  in 
30  days,  9538  bar  steel  at  40. 

June  26.  Sold  Marc  Lombard  &  Co.,  terms  Regular,  8  deep  well  belted  pumping 
jacks,  at  $12.50;  and  9  B290  one-horse  mowers,  at  $40.00.     Shipped  " Delivered." 

June  27.      H.  M.  Miller  sold  35  shares  of  his  stock  to  J.  E.  Colby. 

June  27.  Received  J.  C.  Houston's  check  for  the  net  amount  to  settle  invoice  of 
June  17  and  freight  advanced  by  us  on  that  date. 

June  28.     Bought  office  supplies  amounting  to  350,  paying  from  the  petty  cash  fund 

June  28.     The  receiver  for  Wilkins  &  Freeman  mailed  a  statement  showing  the 


BOOKKEEPING  55 

liabilities  of  that  firm  to  be  $10500.00,  and  the  assets  $6825.00  after  all  receivership  ex- 
penses have  been  paid.  He  encloses  check  for  the  amount  due  us.  Make  entries  in  the 
Journal  and  the  Cash  Book. 

June  28.  Sold  the  Dalton  Implement  Co.  24  knife  grinders  at  $3.50  and  10  doz. 
rolls  binder  twine,  at  $2.75.  "  Terms  Regular.  We  prepaid  the  freight,  $4.23,  shipping 
via  the  C.  &  A.  R.  R. 

June  28.  Sold  to  F.  E.  Durrell  on  our  usual  terms,  18  No.  03  cultivators  at  $12.50 
and  4  No.  5  gang  plows  at  $37.50.     Freight  charges  to  be  paid  by  the  buyer. 

June  29.  G.  E.  Baker  paid  cash  for  his  note  due  tomorrow  and  interest  for  90  days. 
See  opening  entry,  May  1. 

June  29.  Received  cash  from  W.  F.  McKinney  for  our  invoice  of  June  19  less  cash 
discount.     If  he  is  entitled  to  any  discount  for  anticipation,  allow  it. 

June  29.  The  payroll  for  this  week  was  $174.60,  as  follows:  General  Expense,  $10.00; 
Materials  Expense,  $12.50;  Manufacturing  Labor,  the  rest.     Paid  Miss  Wilson's  salary. 

June  29.  The  treasurer  reports  interest  earnings  received  on  funds  deposited  in 
bank,  $250.00.     The  bank  has  credited  our  account  as  for  a  cash  deposit. 

June  29.     Paid  the  monthly  salaries  the  same  as  last  month. 

June  29.  Mailed  to  Critchell  &  Whitney  a  check  to  reach  them  July  1  for  the  amount 
due  them  on  that  date,  as  itemized  in  Voucher  No.  2. 

Post. 

Test  the  Vouchers  Payable  Register. 

Take  a  trial  balance. 

Make  statements,  using  the  following  estimates  and  inventories: 

Depreciation  on  Factory  &  Site,  \  of  1% $  ** 

Depreciation  on  Tools  &  Machinery,  \  of  1% *** 

Interest  accrued  on  notes  receivable ** 

Discount  at  6%  on  notes  payable * 

Unexpired  insurance  2  yrs    11  mo *** 

Implements  inventoried  at 6854 

Materials  inventoried  at 310 

Unfinished  implements  inventoried  at 469 


Estimated  Materials,  8295.60;  Labor,  $174.25. 


Anticipated  cash  discounts  on  sales *** .  ** 

Anticipated  freight  allowance  to  Marc  Lombard  &  Co 22 .50 

Anticipated  freight  allowance  to  S.  F.  Lancey * 3.75 

Anticipated  cash  discount  on  vouchers  payable * .  ** 

Your  statement  of  resources  and  liabilities  will  have  to  show  the  following  items 
as  liabilities: 

Reserve  for  Depreciation. 

Reserve  for  Surplus. 

Undivided  Profits  (the  ledger  balance  plus  the  profits  for  June). 

The  directors  have  seen  and  approved  your  statements.     They  order  a  Reserve  for 
Surplus,  $500.00.     They  also  declare  a  dividend  of  \\%  to  be  paid  at  once  in  cash. 
Prepare  Dividend  List  No.  2. 

Make  journal  entries  for  the  reserve  and  dividend  appropriation,  and  post  them. 
Pay  Dividend  No.  2  in  cash. 
Make  a  Journal  entry  charging  off  depreciation. 


56  BOOKKEEPING 

Close  the  loss  or  gain  accounts  in  your  General  Ledger,  following  the  order  of  clos- 
ing given  last  month. 

Prepare  a  balance  of  balances. 

REVIEW  NOTES,  QUESTIONS,  AND  PROBLEMS 

1.  An  inventory  of  $50.75  was  used  in  closing  the  Materials  Expense  account  May  31. 
It  represented  the  coal  on  hand.  What  effect  did  this  inventory  have  on  the  cost  of 
Materials  Expense  for  May? 

2.  This  inventory  was  brought  down  June  1.  What  effect  had  this  on  the  cost 
of  Materials  Expense  for  June? 

3.  Assuming  that  the  hard  (nut)  coal  was  all  used  before  any  soft  coal  was  used, 
how  much  soft  coal  was  used  during  May?     During  June? 

4.  Since  both  coal  bills  were  bought  in  May,  why  did  you  not  close  the  Materials 
Expense  account  so  as  to  charge  them  both  against  May?  How  could  this  have  been 
done?     Why  would  it  have  been  improper? 

5.  Both  bills  were  bought  in  May.  Both  were  paid  in  June.  Do  either  of  these 
facts  indicate  how  much  shall  be  charged  against  May  and  June  respectively?  What 
is  the  proper  amount  chargeable  to  a  given  month  and  how  is  it  ascertained? 

6.  What  two  inventories  must  be  taken  into  consideration  in  determining  the 
amount  of  labor  expended  upon  implements  produced  during  a  given  month? 

7.  Why  did  the  Manufacturing  Labor  account  have  only  one  inventory  June  29? 

8.  The  anticipated  cash  discounts  on  May  sales  due  in  June  was  added  to  the  May 
discounts.     What  effect  had  this  on  the  Cash  Discount  Dr.  account  for  May? 

9.  The  above  inventory  was  brought  down.  What  effect  had  this  on  the  Cash 
Discount  Dr.  account  for  June? 

10.  Prepare  a  list  of  discounts  on  June  sales.  Does  the  net  result  of  the  Cash  Dis- 
count Dr.  account  for  June  agree  with  this  total?  Explain  how  your  May  31  and  June 
29  inventories  were  used  to  bring  this  about 

11.  If  the  total  of  discounts  on  sales  made  during  a  given  month  should  not  agree 
with  the  result  shown  by  the  Cash  Discount  Dr.  account,  what  would  be  the  reason  for 
the  disagreement,  assuming  no  error  of  computation  on  the  bookkeeper's  part?  Explain 
carefully. 

12.  What  was  the  percentage  of  profit  on  implements  sold  during  May  over  their 
estimated  cost?     During  June? 

13.  What  must  be  charged  for  an  article  the  estimated  cost  on  which  is  $50.00, 
to  realize  the  above  profit  for  May?     For  June? 

14.  What  was  the  percentage  of  profit  on  implements  sold  during  May  over  the 
actual  cost  of  production?     During  June? 

15.  What  was  the  percentage  of  profit  on  implements  sold  during  May  over  the 
actual  production  cost  plus  charges  for  depreciation  and  general  expense?     During  June? 

16.  What  was  the  percentage  of  net  earnings  on  investment  during  May?  Dur- 
ing June? 

Note.     The  investment  for  June  is  inclusive  of  capital  stock,  all  reserves,  and  undivided  profits. 


BOOKKEEPING  57 

CLOSING  CORPORATION  BOOKS  AND  DISPOSING  OF  PROFITS 

Following  are  five  exercises  the  main  purpose  of  which  is  to  illustrate  different  methods 
of  closing  the  ledger  and  distributing  the  profits  of  a  large  corporation.  Incidentally 
the  accounts  will  be  in  each  case  typical  of  a  different  business.  In  each  exercise,  the 
data  given  is  to  be  written  up  by  the  student  in  his  ledger  and  cash  book,  after  which 
the  student  will  proceed  to  close  the  ledger  in  accordance  with  the  specific  instructions 
which  will  be  given  for  each  step. 

Certain  journal  entries  will  be  required  as  the  work  proceeds.  In  order  to  econo- 
mize space  in  the  journal,  write  the  journal  entries  for  each  exercise  immediately  after 
the  journal  entries  for  the  preceding  exercise,  leaving  only  two  lines,  on  the  latter  of 
which  will  be  written  the  number  of  the  new  exercise. 

Handle  the  cash  book  in  the  same  way.  Leave  two  lines  between  each  exercise 
and  the  one  preceding  it,  writing  the  number  of  the  exercise  on  the  second  line.  Use 
the  simple  form  of  two  column  double  entry  cash  book. 

In  none  of  these  exercises  is  it  pretended  that  a  complete  series  of  accounts  is  exhib- 
ited. The  Exercises  are  of  necessity  brief,  and  contain  only  a  few  accounts,  but  such 
accounts  as  are  shown  are  typical  ones,  and  an  understanding  of  them  will  give  the  student 
an  appreciation  of  other  accounts  belonging  to  the  same  general  class. 

No  journal  entries  are  required  to  close  one  account  into  another.  Make  journal 
entries  for  the  transfers  of  portions  of  the  profits  to  reserve,  fund,  and  dividend  accounts. 
(This  is  often  done,  however,  without  journal  entries.)  When  cash  is  paid  out  an  entry 
in  the  cash  book  is  required. 

_  EXERCISE  I— THE  RIAI/TO  PRODUCE  CO. 

Purpose 

To  show  the  process  of  closing  Loss  &  Gain  into  Undivided  Profits  and  the  dis- 
tribution therefrom  to  reserve  accounts  and  to  the  Dividend  account. 

The  general  ledger  of  the  Rialto  Produce  Company  exhibits  the  following  condition 
after  the  loss  or  gain  accounts  have  been  closed  into  Loss  &  Gain,  August  31,  19 — .  Open 
the  accounts  and  enter  the  items  enumerated.  Open  six  accounts  on  ledger  page  1, 
and  six  accounts  on  page  2.  Give  each  account  six  lines,  except  the  Loss  and  Gain 
account  and  the  Undivided  Profits  account,  which  require  twelve  lines  each. 

The  Capital  Stock  account  is  credited  for  Subscription  $50000.00  under  date  of  June  of  1,  19 — . 

The  Furniture  &  Fixtures  account  has  been  closed  August  31,  and  an  inventory  of  $3400.00  brought 
down. 

The  Merchandise  account  shows  an  inventory  brought  down  of  $22640.60. 

The   Real   Estate   account   exhibits   an  inventory  of  $20000.00. 

The  Loss  &  Gain  account  contains  the  following  items,  all  under  date  of  August  31:  Losses:  Furni- 
ture &  Fixtures,  $75.00;  Expense,  $443.10;  Real  Estate,  $150.00;  Salaries,  $880;  Advertising,  $111.00. 
Gains :  Mdse,  $2975.60 ;  Cash  Discount,  $230.50 ;  Consignments,  $456.25.  These  items  represent  the  amounts 
which  have  been  closed  from  the  various  loss  or  gain  accounts. 

The  Undivided  Profits  account  contains  the  following  items.  Debits:  July  31,  Surplus,  $2000.00; 
July  31,  Reserve  for  Bad  Debts,  $50.00;  Credits:  July  1,  Balance,  $1585.80;  July  31,  Loss  &  Gain,  $2769.50. 

The  Accounts  Receivable  account   (a  controlling  account)  shows  a  balance  of  $2124.50. 

The  Accounts  Payable  account  shows  a  balance  of  $1526.45. 

The  Dividend  No.  7  account  shows  a  credit  of  $1500.00,  taken  from  Undivided  Profits  June  1,  19 — . 
Against  this  credit  are  the  following  debits:    June  10,  Cash,  $800.00;  June  20,  Cash,  $400.00. 

Note:  A  separate  account  is  kept  in  the  ledger  for  each  dividend  declared.  Under  this  plan  the 
ledger  will  show  just  what  dividends  are  unpaid  and  the  amount  of  the  unpaid  balance  of  each.     These 


58 


BOOKKEEPING 


separate  accounts  may  be  kept  as  controlling  accounts,  the  details  being  shown  in  a  Dividend  Book,  or 
they  may  be  kept  as  consolidated  accounts,  the  details  showing  in  the  ledger.  In  this  exercise  they  are 
controlling  accounts. 

The  Dividend  No.  8  account  has  no  entries  as  yet. 

The  Surplus  account  shows  two  credit  items:  June  30,  Undivided  Profits,  $2000.00;  July  31,  Undi- 
vided Profits,  $2000.00. 

The  Reserve  for  Bad  Debts  account  shows  two  credit  items:  June  30,  Undivided  Profits,  $50.00; 
July  31,  Undivided  Profits,  $50.00. 

The  Cash  Books  shows  a  balance  August  31  of  $12069.90. 

After  opening  the  above  accounts  and  making  the  entries  indicated,  take  a  trial 
balance. 

August  31.  Close  the  Loss  &  Gain  account  into  Undivided  Profits.  The  net  amount  thus  trans- 
ferred represents  in  a  single  amount  the  profits  of  the  business  before  any  amounts  are  set  aside  for  sur- 
plus or  reserved  for  bad  debts,  or  paid  out  for  dividends. 

Dividend  No.  7,  which  was  declared  June  1,  has  not  all  been  paid  in  cash  to  the  stockholders.  Ascer- 
tain from  the  dividend  account  the  amount  of  this  unpaid  balance,  and  pay  it  in  cash.  A  cash  book  entry 
is  required  for  this  transaction.     Post  the  entry  at  once. 

The  directors  order  that  the  following  amounts  be  taken  from  the  Undivided  Profits  account  to 
the  reserve  accounts:  For  bad  debts,  1$%  of  all  accounts  receivable;  for  surplus,  an  amount  equal  to  2\% 
of  the  capital  stock.  Make  journal  entries  and  post.  Close  Undivided  Profits  with  a  balance,  in  order 
to  ascertain  the  amount  available  for  dividends. 

Sept.  1.  A  dividend  of  2%  (Dividend  No.  8)  is  declared  by  the  directors.  Make  a  journal  entry 
and  post. 

Sept.  10.  Dividends  amounting  to  $800.00  are  paid  in  cash  to  stockholders  E,  B,  C  and  D  on  account 
of  Dividend  No.  8.     Cash  book  entry. 

Take  a  trial  balance. 

Problem:  There  are  500  shares  of  Rialto  Produce  Company  stock,  owned  as  follows:  A,  100  shares! 
B,  120  shares;  C,  50  shares;  D,  150  shares;  E,  80  shares.  Properly  rule  up  a  sheet  of  blank  paper  and 
prepare  Dividend  List  No.  8  as  follows: 


DIVIDEND  NO.  8.     RIALTO  PRODUCE  00.  2% 


Date 
19—. 

Shareholders 

No.  OF 
Shares 

Par  Value 
of  Shares 

Amount  of 
Dividends 

When 
Paid 

Shareholder's 
Receipt  (Sig- 
nature) 

Sept.  1 

A 
B 
C 
D 
E 

Totals 

= 

Fill  out  the  columns  of  the  above  form  from  information  given  you  under  dates  of  Sept.  1  and  Sept.  10. 

The  column  for  the  shareholder's  receipt  will,  of  course,  not  be  included  in  a  form 
used  by  a  corporation  which  pays  dividends  by  dividend  check  or  the  stockholders  of 
which  live  at  a  distance  and  send  their  receipts  by  mail. 

Review  Questions 

Into  what  account  was  the  Loss  &  Gain  account  closed? 

What  does  the  amount  closed  from  the  Loss  &  Gain  account  show? 

From  what  account  were  the  two  reserves  taken? 


BOOKKEEPING 


59 


What  account  did  the  directors  inspect  in  order  to  determine  the  amount  available  for  Dividend 
No.  8?     When  did  they  inspect  it? 

What  does  the  difference  between  the  debit  and  credit  sides  of  the  Undivided  Profits  account  indi- 
cate as  that  account  now  stands? 

Suggest  two  possible  ways  in  which  the  balance  of  Undivided  Profits  could  be  disposed  of,  if  it  were 
desired  to  close  that  account. 

EXERCISE  II— THE  NORTHWESTERN  CONSTRUCTION  CO. 

Purpose 

To  show  the  process  of  closing  subordinate  loss  or  gain  accounts  into  main  loss  or 
gain  accounts,  the  closing  of  main  loss  or  gain  accounts  into  the  Loss  &  Gain  account; 
the  closing  of  Loss  &  Gain  into  Undivided  Profits;  and  the  distribution  therefrom  to  Sink- 
ing Fund  Reserve,  Reserve  for  Bad  Debts,  Surplus,  and  Dividend  accounts. 

Under  the  plan  of  distribution  shown  in  Exercises  I  and  II  the  entire  net  profit  of 
the  business  is  transferred  from  the  Loss  &  Gain  account  to  the  Undivided  Profits  account, 
thus  exhibiting  the  profit  at  the  time  of  closing  in  a  single  figure.  For  this  reason  this 
plan  is  preferable  to  any  other.  Its  effect  is  to  make  the  Loss  &  Gain  account  show  the 
sources  of  profit  and  loss,  and  the  Undivided  Profits  account  show  the  avenues  of  dis- 
tribution of  profits.  The  use  of  the  Undivided  Profits  account  begins  where  the  use  of 
the  Loss  &  Gain  account  ceases.     The  following  diagram  will  illustrate  this: 

Diagram  for  Exercise    II 


Tools  & 
Machinery 

Construction 
Expense 

s 

Bond  Sink- 
ing Fund 

> 

Construction 

Construction 
Returns 

Reserve  for 
Bad  Debts 

General 
Expense 

Loss  &  Gain 

Undivided 
Profits 

Surplus 

Interest 

on 
Bonds 

Dividend 
No.  4 

Real  Estate 

Salaries  & 
Commissions 

Nov.  30,  19 — .  The  accounts  of  the  Northwestern  Construction  Company  stand 
as  follows.  Open  them  in  the  ledger  in  the  order  named.  Give  Construction  Expense, 
Loss  and  Gain,  and  Undivided  Profits  ten  lines  each;  all  other  .accounts  six  lines  each. 

The  Capital  Stock  account  has  one  credit  entry:    Sept.  1,  19 — ,  Subscription,  $75000.00. 
The  Real  Estate  account  exhibits  an  inventory  Nov.  1  of  $10950.00. 

The  Tools  &  Machinery  account  exhibits  an  inventory  Nov.  1  of  $44250.00.  This  is  a  property 
account.    It  includes  tools  and  machinery  used  for  construction  purposes. 


60  BOOKKEEPING 

The  Construction  Expense  account  has  four  entries,  all  debits:  Nov.  5,  Cash,  $1120.00;  Nov.  7,  Cash, 
$6.50;  Nov.  16,  Cash,  $1065.40;  Nov.  25,  Cash,  $40.00.  These  are  the  sums  paid  out  for  labor  and  ma- 
terials used  in  building. 

The  Construction  Returns  account  exhibits  a  total  credit  for  November  of  $9609.20.  This  is  the 
total  amount  received  from  customers  for  whom  we  have  built. 

The  Construction  account  contains  no  entries. 

The  "4%  Bonds  of  1918"  account  has  a  credit  balance  of  $10000.00,  dated  Nov.  1.  This  $10000.00 
is  a  liability.  The  corporation  will  have  to  redeem  the  bonds  in  1918.  Meantime,  interest  must  be  paid 
every  quarter  at  the  rate  of  4%  per  annum. 

The  Salaries  &  Commissions  account  contains  the  following  debits:  Nov.  30,  Payroll,  $1510.00; 
Nov.  30,  Officers'  Salaries,  $850.00;  Nov.  30,  Commissions,  $275.00.  These  debits  are  the  net  results 
of  three  subordinate  accounts  which  have  been  closed  into  the  Salaries  &  Commissions  account.  The 
"Commissions"  referred  to  are  percentages  allowed  to  agents  aside  from  salary. 

The  General  Expense  account  shows  one  debit  item:  Nov.  30,  Cash,  $724.50.  This  is  the  total  of 
the  Expense  column  which  has  just  been  posted  from  the  cash  book.  It  includes  items  of  expense 
not  properly  chargeable  to  some  special  expense  account. 

The  Interest  on  Bonds  account  shows  a  debit  footing  of  $300.00.  This  account  contains  only  items 
of  interest  paid  on  the  4%  Bonds  of  1918. 

The  Loss  &  Gain  account  contains  no  entries. 

The  Accounts  Receivable  account  shows  a  balance  of  $11248.25. 

The  Bills  Receivable  account  shows  a  balance  of  $10147.15. 

The  Undivided  Profits  account  shows  a  credit  balance  of  $732.03,  dated  Nov.  1. 

The  Bond  Sinking  Fund  has  one  credit  entry  of  $1000.00,  closed  from  Undivided  Profits  on  Oct.  1. 
This  account  contains  amounts  reserved  from  the  profits  at  periodical  intervals  in  order  to  provide  for 
the  redemption  of  the  bonds  in  1918.  It  is  planned  that  the  amounts  so  reserved  will  aggregate  $10000.00 
when  the  time  comes  for  paying  off  the  bonds  in  1918. 

The  Reserve  for  Bad  Debts  account  shows  a  credit  balance  of  $47.50,  dated  Oct.  1. 

The  Surplus  account  shows  a  credit  balance  of  $500.00,  dated  Oct.  1. 

The  Dividend  No.  4  account  shows  no  entries. 

The  Cash  Book  shows  a  balance  on  Nov.  30  of  $14401.93. 

Take  a  trial  balance. 

Nov.  30,  19 — .  Pay  in  cash  interest  on  the  bonds  for  one  quarter.  You  must  determine  the  amoun- 
of  this  payment  from  the  amount  of  the  bonds  outstanding  and  the  rate  of  interest  they  bear.  Cash  book 
entry. 

Close  Construction  Returns  and  Construction  Expense  into  Construction.  The  value  of  construc- 
tion materials  on  hand,  $22.50,  is  Construction  Expense  inventory. 

Close  Tools  &  Machinery  (Inventory  $44000.00),  Construction,  Salaries  &  Commissions,  General 
Expense,  Interest  on  Bonds,  and  Real  Estate  (inventory,  $10900.00),  into  Loss  &  Gain. 

Close  Loss   &  Gain  into  Undivided   Profits. 

Set  aside  $1000.00  from  Undivided  Profits  for  the  Bond  Sinking  Fund  account.     Journal  entry. 

Set  aside  \%  of  Accounts  Receivable  for  the  Reserve  for  Bad  Debts.  This  is  reserved  from  the 
Undivided  Profits  account.     Journal  entry. 

Reserve  $500.00  from  Undivided  Profits  for  the  Surplus  Fund.  Journal  entry.  Inspect  the 
Undivided  Profits  account  to  ascertain  the  amount  available  for  a  dividend. 

Nov.  30.    A  dividend  of  \\%  (Dividend  No.  4)  is  declared.    Journal  entry. 

Close  the  Undivided  Profits  account. 

Take  a  trial  balance. 

Problem:  Dec.  10.  The  shareholders  in  this  company  are  A,  B,  C,  and  D,  who  hold  stock  as  fol- 
lows: A,  150  shares  of  $100.00  each;  B,  200  shares  of  $100  each;  C,  220  shares  of  $100.00  each;  D,  180 
shares  of  $100.00  each.  A,  B,  and  C  have  today  been  paid  in  cash  for  their  dividends.  Make  the  entry 
in  the  cash  book  and  post.     Prepare  Dividend  List  No.  4  as  in  Exercise  I. 


BOOKKEEPING  61 

Review  Questions 

What  six  main  loss  or  gain  accounts  are  shown  in  Exercise  II? 

What  two  subordinate  loss  or  gain  accounts  are  shown  and  to  what  account  are  they  subordinate? 

Into  what  account  are  all  losses  and  gains  finally  gathered? 

What  is  the  advantage  of  closing  Loss  &  Gain  into  Undivided  Profits  before  taking  out  any  reserves? 

What  account  shows  sources  of  profit  and  loss? 

What  account  shows  avenues  of  distribution  of  profits? 

What  four  accounts  show  how  the  profits  are  distributed? 

Why  was  the  Undivided  Profits  account  closed  before  Dividend  No.  4  was  declared? 

EXERCISE  III— THE  C.  &  G.  R.  B.  CO. 

Purpose 

To  show  the  method  of  handling  stock  and  dividend  accounts  when  both  common 
and  preferred  stock  are  issued;  to  show  a  Bond  account  and  Sinking  Fund  Asset  account 
as  kept  when  assets  are  placed  in  the  hands  of  Trustees  for  the  redemption  of  the  bonds; 
and  other  features  as  in  Exercise  II. 

Accounts 

Sinking  Fund  Assets:  The  student  is  referred  to  the  definitions  of  "Reserve  for  Sinking  Fund" 
and  "Sinking  Fund  Assets,"  on  page  169.  Remember  that  these  two  accounts  are  not  at  all  alike — in  fact, 
they  are  diametrically  opposite.  The  Sinking  Fund  Reserve  is  a  mere  bookkeeping  device  for  reservation 
of  profits  (as  are  the  Surplus  and  other  reserve  accounts).  The  Sinking  Fund  Assets  account  contains  a 
record  of  actual  assets  reserved.     The  account  used  in  this  exercise  is  the  Sinking  Fund  Assets  account. 

Operating  Expense:  Separate  records  are  kept  of  expenses  that  have  to  do  with  the  actual  opera- 
tion of  the  road.  Accounts  are  kept  with  Transportation  Expense  and  Maintenance  Expense,  and  these 
are  closed  into  Operating  Expense,  which  is  in  its  turn  closed  into  Expense. 

Repair  Shop,  Rolling  Stock,  and  Road-Bed  and  Tracks.  These  are  typical  property  accounts. 
Instead  of  being  closed  with  an  inventory,  a  certain  amount  is  "written  off"  of  each  into  the  Reserve  for 
Depreciation  account.  This  is  done  by  a  journal  entry  crediting  the  property  account  and  debiting  Reserve 
for  Depreciation.     The  property  account  is  then  closed  with  a  balance. 

Depreciation  Reserve.  Depreciation  is  here  kept  as  a  reserve  account.  A  part  of  the  Undivided 
Profits  account  is  carried  to  the  Depreciation  Reserve  account  by  a  journal  entry  debiting  Undivided 
Profits  and  crediting  Depreciation  Reserve.  The  amounts  written  off  of  the  various  property  accounts 
are  carried  to  the  debit  of  Depreciation  Reserve. 

Note:  The  depreciation  account  may  be  treated  as  an  expense  account.  In  such  a  case,  Deprecia- 
tion is  debited  for  items  of  depreciation  from  the  various  property  accounts,  and  Depreciation  is  closed 
into  Loss  &  Gain.     This  is  not  the  method  used  in  this  exercise. 

It  may  be  here  remarked  that  there  are  other  accounts  usually  treated  as  reserves  which  may  be 
treated  as  simple  expense  accounts  if  desired.  The  Contingency  account  and  the  Dividends  account  are 
instances  of  this.  Instead  of  setting  aside  an  amount  for  reserve  in  each  case,  against  which  the  losses 
are  charged,  the  losses  may  be  charged  directly  to  the  account  affected,  which  is  closed  into  Loss  and 
Gain.     This  is  not  so  good  as  the  plan  of  creating  a  reserve. 

Reserve  for  Contingencies.  This  account  is  kept  in  order  to  provide  against  loss  through  unforeseen 
contingencies.  Damages  for  injuries  and  other  heavy  expenses  aside  from  the  regular  expenses  of  con- 
ducting the  business,  are  provided  for  through  this  reserve  account. 

The  diagram  on  page  196  is  illustrative  of  the  method  of  handling  subordinate 
expense  accounts  used  in   Exercise   III. 

In  opening  the  ledger  accounts,  give  the  Loss  and  Gain  and  Undivided  Profits 
accounts  each  ten  lines;  all  other  accounts,  six  lines  each. 

Apr.  30,  19 — .     The  ledger  and  cash  book  of  the  C.  &  G.  Railroad  stands  as  follows: 

Capital  Stock  (Common),  $75000.00. 

Capital  Stock  (Preferred),  $925000.00. 

First  Mortgage  Bonds,  $100000.00. 

Sinking  Fund  Assets  (Trustees),  $75000.00  debit.  This  account  exhibits  the  total  assets  which 
have  been  paid  over  to  trustees  for  the  redemption  of  the  First  Mortgage  Bonds  at  maturity.    It  is  some- 


62 


BOOKKEEPING 

Diagram  for  Exercise  III 


Transport'!) 
Expense 


Mainten'ce 
Expense 


Operating 
Expense 


Expense 


Interest 
on  Bonds 


Taxes 


Track 
Rental 


Express 
Earnings 


Freight 
Earnings 


Passenger 
Earnings 


Loss  &  Gain 


Surplus 

Conting'cy 
Reserve 

Undivided   \/ 

Reserve  for 
Deprec'n 

fronts         KT 

Div.  No.  10 
(Preferred) 

Div.  No.  10 

(Common) 

times  called  the  Trustees  of  Sinking  Fund  account,  but  this  title  is  misleading,  as  the  trustees  usually 
have  no  personal  liability  except  for  honest  and  careful  management. 

The  Transportation  Expense  account  shows  a  debit  balance  of  $598.70.  This  includes  such  items 
as  yard,  shop,  and  road  salaries;  operating  supplies;  and  advertising. 

The  Maintenance  Expense  account  shows  a  debit  balance  of  $987.39.  This  includes  the  cost  of 
materials  and  labor  used  in  keeping  the  roadway,  structures  (depots,  freight  houses,  etc.),  and  equip- 
ment of  the   road  in   good   condition. 

The  Operating  Expense  account  contains  no  entries. 

The  General  Expense  account  shows  a  debit  footing  of  $675.40. 

The  Interest  on  Bonds  account  shows  a  debit  footing  of  $333.33. 

The  Repair  Shop  account  shows  an  inventory  of  $12650.00.  This  is  a  property  account  exhibiting 
the  value  of  the  shops  in  which  cars  are  repaired. 

The  Rolling  Stock  account  shows  an  inventory  of  $300000.00.  This  is  a  property  account,  represent- 
ing the  value  of  cars  and  locomotives. 

The  Road  Bed  and  Tracks  account  shows  an  inventory  of  $710000.00.  This  is  a  property  account. 
It  is  charged  with  the  cost  of  track  construction  and  represents  the  value  of  the  tracks  as  laid  down. 

The  Loss  &  Gain  account  exhibits  the  following  entries,  all  dated  Apr.  30,  19 — :  Debits:  Taxes, 
$360.07;  Track  Rentals,  $183.40.  Credits:  Freight  Earnings,  $16684.28;  Express  Earnings,  $1237.50; 
Passenger  Earnings,  $13467.20.  These  amounts  are  the  losses  and  gains  which  have  just  been  closed 
from  the   five  accounts  named. 

The  Undivided  Profits  account  shows  a  balance  of  $6740.00. 

The  Surplus  account  shows  a  balance  of  $27043.60. 

The  Contingency  Reserve  account  shows  a  credit  balance  of  $6806.29. 

The  Depreciation  Reserve  account  shows  a  credit  balance  of  $1956.40. 


BOOKKEEPING  63 

The  Dividend  No.  9  (Common)  account  has  the  following  entries:  Credit:  Feb.  1,  Undivided  Profits, 
$750.00.     Debit:   Apr.   30,   Cash,   $650.00. 

The  Dividend  No.  10  (Common)  account  has  no  entries. 
The  Dividend  No.  10  (Preferred)  account  has  no  entries. 
The  Cash  Book  shows  a  balance  of  $73246.98. 

Apr.  30,  19 — .     Paid  interest  on  bonds  in  cash,  $166.67. 

Dividend  warrants  issued  on  Feb.  1  to  holders  of  common  stock  for  Dividend  No.  9  are  presented 
for  payment.     They  amount  to  $100.00,  and  are  paid  in  cash. 

Close  Transportation  Expense  and  Maintenance  Expense  into  Operating  Expense.  Close  Oper- 
ating Expense  into  General  Expense.  Close  General  Expense  and  Interest  on  Bonds  into  Loss  &  Gain. 
Taxes,  Track  Rental,  Express  Earnings,  Freight  Earnings,  and  Passenger  Earnings  have  already  been 
closed  into  Loss  &  Gain.     Close  Loss  and  Gain  into  Undivided  Profits. 

Write  off  for  depreciation  as  follows:  From  Repair  Shop,  2%;  from  Rolling  Stock  1%;  from  Road 
Bed  and  Tracks,  \%.     Close  the  three  property  accounts. 

May  1.  The  directors  order  reservations  from  profits  as  follows:  For  surplus,  $2500.00;  for  con- 
tingencies, $1000.00;  and  for  depreciation,  $5000.00.  They  also  declare  dividends  of  2%  on  the  pre- 
ferred stock  and  1%  on  the  common  stock  (Dividend  No.  10).     Close  the  Undivided  Profits  account. 

The  preferred  dividends  are  paid  in  cash. 

The  directors  order  that  $25000.00  in  cash  be  paid  over  to  the  sinking  fund  trustees.  The  trustees 
now  have  $100000,  and  are  instructed  to  pay  off  the  bonds.  Make  a  journal  entry  debiting  the  bond 
account  and  crediting  the  sinking  fund  account. 

May  10.  The  company  has  lost  a  damage  suit  and  been  compelled  to  pay  $5000.00  in  cash  for  an 
accident  to  a  passenger.     Charge  the  Contingency  account. 

Take  a  trial  balance. 

Review  Questions 

What  is  a  Sinking  Fund  Asset  account? 

Why  is  it  the  exact  opposite  of  a  Sinking  Fund  Reserve  account? 

What  is  the  difference  between  a  Depreciation  Reserve  account  and  a  Depreciation  Expense  account? 

What  is  a  Contingency  Reserve? 

What  subordinate  account  closes  into  Expense,  in  Exercise  III?  What  two  subordinate  accounts 
close  into  this  subordinate  account? 

Of  the  seven  main  loss  or  gain  accounts,  what  four  exhibit  expense? 

What  two  classes  of  dividend  accounts  are  kept?     Why? 

What  other  name  is  sometimes  given  for  the  Sinking  Fund  Assets  (Trustees)  account?  Why  is  the 
name  here  used  preferable? 

Into  what  accounts  are  the  undivided  profits  distributed? 

EXERCISE  IV— THE  SYRACUSE  GAS  CO. 
Purpose 

To  give  an  idea  of  the  elaborate  system  of  cost  accounts  required  for  the  book- 
keeping of  a  large  manufacturing  corporation;  to  show  how  the  profits  of  the  business  of  a 
subsidiary  company  may  be  kept  in  the  Loss  &  Gain  account,  no  special  funds  or  reserves 
being  maintained  except  for  Dividend,  and  no  Undivided  Profits  account  being  kept. 

As  the  obligations  of  the  subsidiary  company  are  all  guaranteed  by  the  larger  com- 
pany of  which  it  is  a  part,  there  is  no  necessity  for  funding  and  reserve  accounts.  The 
entire  net  profit  is  shown  in  the  Loss  &  Gain  account. 

Accounts 

Construction.  This  is  a  property  account.  It  is  charged  with  costs  of  construction  and  represents 
the  value  of  the  company's  mains. 

Franchise.  This  is  a  property  account,  representing  the  value  of  the  company's  franchise,  which 
is,  speaking  in  a  general  way,  the  privilege  granted  by  the  city  of  laying  and  maintaining  gas  pipes. 


64  BOOKKEEPING 

Gas  Coal.  This  is  an  account  showing  the  cost  of  the  coal  used  in  the  manufacture  of  gas.  It  is 
closed  into  Manufacturing. 

Tar.     This  account  is  similar  to  the  Gas  Coal  account. 

Manufacturing.  This  is  a  summary  account  into  which  are  closed  many  subordinate  accounts  such 
as  Gas  Coal,  Tar,  etc.     Its  result  shows  the  total  manufacturing  cost.     It  is  closed  into  the  Gas  account. 

Gratuitous  Work.  This  account  shows  the  cost  of  work  done  free  of  charge  for  customers.  It  is 
closed  into  Distribution. 

Repairs  to  Mains.  This  account  shows  the  cos  v  of  work  in  repairing  the  large  pipes  or  mains  through 
which  the  gas  is  distributed  over  the  city.     It  is  closed  into  Distribution. 

Distribution.  This  is  a  summary  account.  Into  it  are  closed  the  many  subordinate  accounts  show- 
ing the  cost  of  the  distribution  of  the  gas.     It  is  closed  into  the  Gas  account. 

Commercial  Expense.  This  is  a  summary  account  into  which  are  closed  the  many  subordinate 
accounts  showing  office  expense.     It  is  closed  into  the  Gas  account. 

Manufacturing  Expense,  Distribution  Expense,  and  Office  Expense  are  subordinate  accounts  clos- 
ing into  Manufacturing,   Distribution,   and  Commercial   Expense  respectively. 

General  Expense  contains  a  record  of  all  expense  not  readily  classified  in  one  of  the  special  expense 
accounts.  Its  net  cost  is  divided  among  Manufacturing,  Distribution,  and  Commercial  Expense  in  the 
proportion  which  Manufacturing  Expense,  Distribution  Expense  and  Office  Expense  bear  to  each  other 
at    the    time    of    closing. 

Gas.  This  account  corresponds  to  the  Mdse  account  of  an  ordinary  business.  Into  it  are  closed 
the  Manufacturing,  Distribution,  and  Commercial  Expense  accounts,  besides  many  other  summary  ac- 
counts for  other  departments  of  the   business. 

This  complex  system  is  not  burdensome.  As  a  matter  of  fact,  the  system  lends  itself  to  economy 
of  labor,  since  it  enables  each  one  of  the  hundreds  of  clerks  to  work  exclusively  on  one  book  or  one  class 
of  entries.  A  large  volume  of  business  could  not  be  handled  without  great  confusion  except  under  a  sys- 
tem that  was  well  classified  and  greatly  subdivided. 

The  diagram  on  page  199  will  illustrate  the  method  of  cost  and  profit  analysis  used 
in  the  exercise.  Note  that  the  General  Expense  account  balance  is  distributed  to  three 
accounts.  Observe  how  the  subordinate  accounts  (eight  are  shown  in  the  diagram), 
close  into  the  summary  accounts  (six  of  which  are  shown).  The  six  summary  accounts 
close  into  Gas,  which  we  may  call  a  principal  loss  or  gain  account.  Two  principal  loss 
or  gain  accounts  are  shown  as  closing  into  Loss  &  Gain.  Only  one  reserve  is  taken  from 
the  Loss  &  Gain  account.  This  diagram  and  the  other  diagrams  which  have  been  shown 
should  suggest  the  unlimited  possibilities  of  cost  analysis  through  the  use  of  subordinate 
and  principal  accounts  and  summary  accounts. 

Give  twelve  lines  in  the  ledger  to  the  Gas  account;  ten  each  to  Manufacturing, 
Distribution,  and  Commercial  Expense;  six  lines  each  to  all  other  accounts. 

The  accounts  of  the  Syracuse  Gas  Company,  a  subsidiary  corporation,  stand  as  follows: 

Capital  Stock,  $100,000.00.     Entry  dated  Oct.  1,  19— . 

Construction.     Dr.  Balance  Oct.  31,  $69802.95. 

Franchise.     Dr.  Balance  Oct.  31,  $25000.00. 

House  &  Lot  Rental.     Debit:     Oct.  1,  Cash,  $525.00.     Credits:     Oct.  2,  Sub-Rentals,  $75.00. 

Gas  Coal.     Dr.  footing  Oct.  31,  $1246.75. 

Tar.     Dr.  footing  Oct.  31,  $126.70. 

Gratuitous  Work.     Dr.  footing  Oct.   31,   $135.50. 

Repairs  to  Mains.     Dr.  footing  Oct.  31,  $420.60. 

Manufacturing  Expense.     Dr.  footing. Oct.  31,  $3000.00. 

Distribution  Expense.     Dr.  footing  Oct.  31,  $2000.00. 

Office  Expense.     Dr.  footing  Oct.  31,  $1000.00. 

General  Expense.     Dr.  footing  Oct.  31,  $1475.64. 

Manufacturing.     Dr.  footing  Oct.  31,  $4562.50. 

Distribution.    Dr.  footing  Oct.  31,  $2123.64. 


bookkeeping 
Diagram  for  Exercise  IV 


66 


Gas  Coal 

Tar 

Gratuitous 
Work 

Repairs  to 
Mains 

\W 

Manufact'r'g 
Expense 

Manufact'r'g 

House  <feLot 
Rental 

Distribution 
Expense 

Distribution 

Office 
Expense 

Commercial 

Gas 

Loss  &  Gain 

Expense 

» 

General 
Expense 

New 
Business 

Dividend 
No.  6 

Taxes 

/                                             * 

Discount 

Commercial  Expense.  Debit  items  Oct.  31  (already  closed  from  subordinate  accounts),  are:  Col 
lection   Expense,   $175.00;   Office   Supplies,   $250.00;   Office   Salaries,   $1250.00. 

New  Business.  Debit  items  Oct.  31  (already  closed  from  subordinate  accounts),  are:  Soliciting, 
$200.00;   Advertising,   $300.00;   Demonstrating,   $220.00. 

Taxes.     Debit  footing  Oct.  31,  $215.00. 

Discount.  Debit  item:  Oct.  31,  Cash  Discount  as  per  C.  B.,  $525.60.  Credit  item:  Oct.  1,  Inven- 
tory brought  down,  $115.00. 

Gas.  Credit  items  Oct.  31  (as  already  closed  from  subordinate  accounts):  Gas  Sales  per  S.  L., 
$17459.60;  Prepayment  Gas  (equivalent  to  Cash  Sales),  $2675.75;  Sundry  Sales,  $1312.50;  City  of  Syra- 
cuse, $2500.00. 

Dividend  No.  6.     No  entries. 

Loss  &  Gain.     Credit  Balance  Oct.  1,  $5308.60. 

Cash  Book.     Balance  Oct.  31,  $14891.57. 

Oct.  31,  19 — .     Close  Gas  Coal,  Tar,  and  Manufacturing  Expense,  into  Manufacturing. 
Close  Gratuitous  Work,  Repairs  to  Mains,  and  Distribution  Expense,  into  Distribution. 
Close  Office  Expense  into  Commercial  Expense. 
Close  General   Expense   into   Manufacturing,  Distribution,  and   Commercial   Expense   as   follows: 


66  BOOKKEEPING 

Divide  its  balance  into  three  parts  bearing  the  same  ratio  to  each  other  as  Manufacturing  Expense  ($3000.00), 
Distribution  Expense  ($2000.00),  and  Office  Expense   ($1000.00)  bear  to  each  other. 
Manufacturing  Expense,  $3000.00 

Distribution  Expense,  2000.00 

Office  Expense,  1000.00 

Total,  6000.00 

It  is  apparent  that  Manufacturing  Expense  is  3000/6000  or  \  of  the  total.  Distribution  Expense 
is  J  of  the  total,  and  Office  Expense  is  \  of  the  total.  One-half  of  the  General  Expense,  therefore,  will 
be  closed  into  Manufacturing,  one-third  into  Distribution,  and  one-sixth  into  Commercial  Expense.  Make 
three   red   ink  entries. 

Close  Manufacturing,  Distribution,  Commercial  Expense,  New  Business,  Taxes,  and  Discount,  into 
Gas.  In  closing  Discount,  use  a  debit  inventory  of  $120.00.  This  inventory  is  the  estimated  amount 
of  discounts  on  October  bills  which  will  be  allowed  during  November,  and  its  effect  is  to  increase  the  cost 
of  discounts  for  October.     Bring  the  inventory  down  as  usual. 

Close  Gas  and  House  &  Lot  Rental  into  Loss  &  Gain.  Close  Loss  &  Gain  with  a  balance,  which 
will  show  the  amount  available  for  dividends. 

Nov.  1.  A  dividend  of  \\%  (Dividend  No.  6)  is  declared  and  paid  in  cash.  Make  a  journal  entry 
and  a  cash  book  entry.     Post  both  entries. 

Take  a  trial  balance. 

Review  Questions 

What  is  the  only  reserve  account  kept  in  Exercise  IV? 

What  two  principal  loss  or  gain  accounts  are  kept? 

Which  is  the  more  important  of  the  two? 

What  are  the  summary  accounts  shown  in  Exercise  IV? 

From  what  four  sources  is  the  cost  of  Manufacturing  ascertained? 

What  is  the  purpose  of  the  Distribution  account? 

From  what  four  sources  is  Distribution  cost  ascertained? 

From  what  two  sources  is  Commercial  Expense  ascertained? 

To  what  accounts  is  the  General  Expense  distributed  and  in  what  proportions?     Explain  fully. 

What  account  in  Exercise  IV  corresponds  to  the  principal  Mdse  account  of  a  mercantile  business? 

Why  is  it  unnecessary  for  this  subsidiary  corporation  to  keep  reserve  and  funding  accounts? 

What  are  the  advantages  of  a  high  classification  of  the  accounts  of  a  large  corporation? 

EXERCISE  V— THE  CANTON  PLOW  CO. 
Purpose 

To  exhibit  the  method  of  making  a  clean-cut  distinction  between  costs  of  manufacturing 
and  costs  of  selling,  so  as  to  arrive  at  the  exact  cost  of  the  article  produced.  To  illustrate  the 
plan  of  taking  surplus  and  reserves  direct  from,  the  Loss  &  Gain  account  and  transferring 
the  remainder  to  the  Undivided  Profits  account. 

The  effect  of  this  plan  of  profit  distribution  is  that  Undivided  Profits  at  no  time 
shows  anything  but  undivided  profits,  or  the  profits  remaining  after  the  surplus  and  reserve 
accounts  have  been  cared  for.  Dividends  are  taken  from  Undivided  Profits.  The  fact 
that  dividends  must  not  exceed  net  profits  makes  this  a  convenient  plan.  The  plan  of 
transferring  the  entire  balance  of  Loss  &  Gain  to  Undivided  Profits  and  taking  surplus, 
reserves,  and  dividends  therefrom,  as  illustrated  in  the  preceding  exercises,  is  the  better 
plan,  however,  and  is  in  more  general  use.  The  less  popular  plan  is  here  shown  in  order 
that  the  student  may  become  familiar  with  both. 

Accounts 

Subscription.  This  account  exhibits  the  balance  unpaid  on  capital  stock.  It  is  a  controlling  account 
for  the  subscribers'  accounts  in  the  stock  ledger. 

Steel,  Lumber,  and  Rivets.  These  accounts  represent  costs  of  materials  used  in  constructing  plows. 
They  close  into  the  Raw  Materials  account. 


BOOKKEEPING  67 

Purchase  Discount.  This  account  effects  a  diminution  of  the  cost  of  materials.  It  is  closed  into 
Raw  Materials. 

Coal,  Office  Expense,  and  General  Expense  are  subordinate  to  Manufacturing  Expense,  closing  into  it. 

Raw  Materials,  Manufacturing  Labor,  and  Manufacturing  Expense  close  into  Manufacturing  Cost. 

Manufacturing  Cost,  when  all  its  subordinate  accounts  are  closed  into  it,  exhibits  the  cost  of  the 
manufactured  product  as  it  is  laid  down  in  the  Store-Room. 

Store-Room  stock  records  should  be  kept.  The  records  of  quantities  of  stock  received  are  entered 
under  proper  heads  (that  is,  a  separate  record  for  each  implement  manufactured),  and  the  quantities  sold  are 
entered  under  these  heads.  The  difference  between  the  quantity  received  and  the  quantity  sold  is,  in 
each  case,  the  quantity  on  hand.  The  inventory  thus  furnished  is  of  great  value  from  day  to  day  as  show- 
ing on  what  articles  the  stock  is  running  low.  At  the  time  of  closing  the  books  an  inventory  should  be 
taken  by  an  actual  count  of  the  goods  in  order  to  guard  against  error  in  the  stock  records.  This  is  some- 
times  called   a    "physical"   inventory. 

Sales.  This  account  is  credited  for  all  sales;  and  the  Selling  Expense,  Shipping  Expense,  and  Sales 
Discount  accounts  are  closed  into  it. 

Selling  Expense  consists  mainly  of  salesmen's  salaries  and  expenses. 

Shipping  Expense  includes  salaries  of  shipping  clerks,  materials  used  in  the  shipping-room,  out- 
freight,  etc. 

Sales  Discounts  are  a  diminution  of  receipts  from  sales.     Hence  this  account  is  closed  into  Sales. 

Plows.     This  is  the  Mdse  account.     It  is  closed  into  Loss  &  Gain. 

Interest.  This  account  affects  neither  the  cost  of  manufacturing  or  the  sales.  It  is  closed  directly 
to  Loss  &  Gain.     Most  of  the  interest  items  are  for  interest  accrued  on  unpaid  subscriptions. 

Plant.  This  is  a  property  account.  It  represents  the  value  of  the  factory  and  site,  machinery, 
and  fixtures.     Separate  records  could  of  course  be  kept  for  these,  things. 

On  page  202  is  a  diagram  illustrating  the  system  of  cost  analysis  and  profit  distribu- 
tion used  in  this  exercise.  Note  the  classification  of  expenses  into  expenses  of  manu- 
facturing and  expenses  of  selling.  Note  that  the  reserves  are  taken  from  Loss  &  Gain 
but  that  dividends  are  taken  from  undivided  profits. 

Dec.  31,  19 — .     The  books  of  the  Canton  Plow  Company  stand  as  follows: 

Capital  Stock,  $100000.00. 

The  subscription  account  is  debited  for  the  full  amount  of  the  capital  stock.  It  also  shows  that 
75%  of  the  capital  stock  has  been  paid  in. 

The  subordinate  material  accounts  exhibit  the  following  total  costs:  Steel,  $12346.45;  Lumber, 
$7842.65;  Rivets,  $3509.84. 

The  Purchase  Discounts  account  exhibits  a  credit  balance  of  $346.78. 

The  Raw  Materials  account  has  no  entries. 

The  Manufacturing  Labor  account  shows  a  total  cost  of  $6074.28. 

The  subordinate  expense  accounts  exhibit  the  following  total  costs:  Coal,  $1925.60;  Office  Expense, 
$1276.24;   General   Expense,   $757.88. 

The  Manufacturing  Expense  account  has  no  entries. 

The  Manufacturing  Cost  account  contains  no  entries. 

The  accounts  subordinate  to  the  Sales  account  show  the  following  debit  footings:  Selling  Expense, 
$429.60;  Shipping  Expense,  $251.25;  Sales  Discounts,  $392.47.     Shipping  Expense  inventory,  $13.50. 

The  Sales  amount  to  $48365.26. 

The  Plows  account  shows  an  inventory  brought  down  of  $9426.75. 

The  Interest   accounts   shows   net   returns   amounting  to   $125.00. 

The  Loss  &  Gain  account  has  no  entries. 

The  Plant  account  shows  an  inventory  brought  down  of  $56542.00. 

The  Accounts  Receivable  account  has  a  balance  of  $5674.20. 

The  Accounts  Payable  account  has  a  balance  of  $4726.89. 

The  Reserve  for  Bad  Debts  account  exhibits  a  credit  balance  of  $129.60. 

The  Surplus  Account  exhibits  a  reserve  of  $13000.00. 


68 


BOOKKEEPING 
DlAGEAM    FOR    EXERCISE     V 


Steel 

\ 

\ 

Lumber 

\ 

Raw 

J 

Materials 

// 

Rivets 

1 

1 

Purchase 
Discount 

MTg 
Labor 

Goal 

V 

\ 

Office 
Expense 

\ 

MTg 

/ 

Expense 

/ 

General 
Expense 

'    ■>< 

v 

• 

/ 

Selling 
Expense 

Shipping 
Expense 

Sales  Dis- 
count 

MTg 

Cost 

\ 

Res.  for 
Bad  Dts. 

\ 

\ 
,.■■■] 

Plows 
(Mdse.) 

Surplus 

.-     \ 

/ 

--''       /             \ 

Loss  ft 

Gain 

( 

Deprec'n 
Reserve 

/               / 

\ 

/ 

/ 

\ 

/ 

Interest 

/                            \ 

Undivided 
Profits 

Sales 


Dividend 


The  Depreciation  Reserve  account  is  credited  with  $1237.50. 
The  Undivided  Profits  account  has  a  credit  balance  of  $329.65. 
The  Dividend  No.  17  account  contains  no  entries. 
The  Cash  Book  balance  is  $36811.47. 

Take  a  trial  balance. 

Dec.  31,  19 — .  A  call  is  issued  for  the  balances  of  unpaid  subscriptions.  These  balances,  with 
accrued  interest  amounting  to  $250.00  in  total,  are  paid  in  in  cash  by  the  subscribers. 

Close  Steel,  Lumber,  Rivets,  and  Purchase  Discount,  into  Raw  Materials.  Inventories:  Steel, 
$1269.50;  Lumber,  $982.60;    Rivets,  $604.27. 

Close  Coal,  Office  Expense,  and  General  Expense,  into  Manufacturing  Expense.  Coal  Inven- 
tory,  $246.80. 

Close  Raw  Materials,  Manufacturing  Labor,  and  Manufacturing  Expense,  into  Manufacturing  Cost. 

Close  Selling  Expense,  Shipping  Expense,  and  Sales  Discount  into  Sales. 

Close  Manufacturing  Cost,  and  Sales,  into  Plows. 

Close  Plows   (Inventory  $9537.20),  and  Interest,  into  Loss  &  Gain. 

Write  off  3%  depreciation  from  the  Plant  account.     This  is  charged  to  Depreciation. 

Make  reserves  as  follows,  from  the  Loss  &  Gain  account:  For  Bad  Debts,  1%  of  Accounts  Receiv- 
able; for  Surplus,  $5000.00;  for  Depreciation  Reserve,  $2000.00. 


BOOKKEEPING  69 

Transfer  the  balance  of  the  Loss  &  Gain  account  to  the  Undivided  Profits  account. 

Jan.  1,  19 — .  It  is  now  apparent  from  the  condition  of  the  Undivided  Profits  account  that  a  5% 
dividend  may  be  safely  declared,  leaving  half  of  the  profits  untouched.  A  5%  dividend  is  therefore 
declared  and  paid  in  cash.  Make  a  journal  entry  and  a  cash  book  entry.  Balance  the  Undivided  Profits 
account. 

Jan.  10.  One  of  our  customers  has  failed.  He  owes  us  $120.00  but  can  pay  only  60$  on  the  dollar, 
which  amount  he  pays  in  cash.  Charge  the  loss  to  the  Reserve  for  Bad  Debts  account.  Make  a  journal 
entry  and  a  cash  book  entry. 

Jan.  15.  One  of  our  employes  has  been  injured  and  we  have  paid  him  $5000.00  in  cash.  As  we 
keep  no  Contingency  reserve,  charge  the  loss  against  the  Surplus  account. 

Balance  the  cash  book. 
Take  a  trial  balance. 

Review  Questions 

What  are  the  two  principal  loss  or  gain  accounts? 

What  account  shows  the  net  cost  of  manufacturing? 

What  account  shows  the  net  returns  from  the  product  manufactured? 

Why  is  Purchase  Discount  classed  with  the  accounts  showing  manufacturing  cost  while  Sales  Dis- 
count is  classed  with  the  selling  accounts? 

What  three  accounts  close  into  Manufacturing  cost? 

What  three  accounts  close  into  Sales? 

What  are  the  subordinate  accounts  shown  in  Exercise  V  and  into  what  summary  accounts  do  they 
close?     (This  question  involves  the  entire  system  of  costs  used  in  this  exercise.) 

Suggest  three  subordinate  accounts  to  close  into  the  Selling  Expense  account. 

The  balance  of  Loss  and  Gain  is  transferred  to  what  four  accounts?  How  much  of  it  is  carried  to 
Undivided  Profits? 

What  is  the  advantage  of  the  plan  used  in  Exercise  V  for  the  Undivided  Profits  account? 

What  is  the  best  way  to  handle  the  Undivided  Profits  account,  and  why? 

What  is  the  only  account  created  from  the  Undivided  Profits  account  in  Exercise  V? 

What  is  done  with  the  balance  of  the  Undivided  Profits  account? 


DISSOLUTION  OF  A  CORPORATION 

A  corporation  may  be  dissolved  in  one  of  four  ways: 

1.  By  charter  limitation,  the  time  having  expired  for  which  it  was  granted  life  by  its 
charter* 

2.  By  completion,  the  purpose  for  which  it  was  created  having  been  fulfilled.  In 
this  case  there  is  no  longer  any  reason  for  its  existence. 

3.  By  involuntary  dissolution,  as  when,  by  the  act  of  court,  its  existence  is  terminated. 
This  may  be  because  of  petition  of  creditors,  or  on  account  of  its  illegal  acts. 

4.  By  voluntary  dissolution,  as  when  stockholders  relinquish  an  unprofitable  enter- 
prise. 

Whatever  may  be  the  cause  of  its  dissolution,  the  net  cash  realized  from  the  sale  of  its 
assets  after  the  expenses  incident  to  dissolution  have  been  met,  is  distributed  among 
investors  in  the  following  general  order  of  precedence: 

1st.      Bondholders. 

2d.      Preferred  Stockholders. 

3d.      Common  Stockholders. 

*See  page  76. 


70  BOOKKEEPING 

Corporations  whose  powers  have  expired  by  limitation  or  otherwise  may  continue 
to  exist  for  two  years  for  the  sole  purpose  of  closing  the  corporate  affairs. 

Closing  Entries  on  Dissolution 

When  the  net  cash  on  hand  is  distributed  among  stockholders,  the  following  entry 
is  made: 

Dr.  Capital  Stock. 
Cr.  Cash. 

It  may  be  that  the  amount  of  cash  so  paid  will  not  equal  the  full  face  value  of  the 
capital  stock.  This  discrepancy  may  be  accounted  for  on  the  books  by  the  following 
entry : 

Dr.  Capital  Stock. 

Cr.  Undivided  Profits. 

If  the  stock  realizes  more  than  its  face,  and  the  cash  paid  to  stockholders  exceeds 
the  face  value  of  the  stock,  then: 

Dr.  Undivided  Profits. 
Cr.  Capital  Stock. 

Since  Capital  Stock,  Undivided  Profits,  and  Cash  were  the  only  open  accounts  before 
these  final  entries  were  made,  every  account  should  now  balance. 

Review  Questions 

1.  What  is  a  corporation? 

2.  Name  the  three  classes  of  corporations  and  define  each. 

3.  In  which  class  are  railroads  and  other  public  utility  corporations  usually  placed? 

4.  Name  at  least  five  advantages  of  the  corporate  form  of  organization. 

5.  What  is  the  Certificate  of  Incorporation? 

6.  Give  several  names  by  which  this  instrument  is  known. 

7.  What  is  a  charter?    What  two  meanings  has  the  word? 

8.  What  is  the  usual  procedure  in  case  of  organization  under  a  general  incorporation  act? 

9.  Who  is  an  incorporator?     A  subscriber?     A  stockholder?     A  promoter? 

10.  State  the  distinction  between  capital  stock  and  capital. 

11.  How  is  the  capital  stock  of  a  corporation  generally  divided? 

12.  What  does  a  stockholder  have  to  show  his  interest  in  the  corporation? 

13.  Is  this  personalty  or  realty? 

14.  State  the  distinction  between  common  and  preferred  stock. 

15.  Under  what  circumstances  is  preferred  stock  generally  issued? 

16.  What  is  participating  preferred  stock? 

17.  What  is  non-participating  preferred  stock? 

18.  What  is  cumulative  preferred  stock? 

19.  In  case  several  classes  of  preferred  stock  are  issued,  how  are  they  distinguished? 

20.  Why  is  it  right  that  some  stock  should  be  preferred? 

21.  Under  what  circumstances  are  dividends  on  stock  sometimes  guaranteed? 

22.  What  is  treasury  stock? 

23.  What  is  watered  stock? 

24.  State  the  distinction  between  watered  stock  and  over-issued  stock. 

25.  What  is  the  nominal  value  of  a  share  of  stock? 

26.  What  is  its  market  value? 

27.  What  is  its  intrinsic  value?     How  may  this  be  ascertained? 

28.  How  may  the  ownership  of  stock  be  transferred? 

29.  Is  a  subscriber  who  transfers  partly  paid-up  stock  relieved  from  liability  for  the  unpaid  balance? 

30.  What  are  dividends? 

31.  By  what  authority  are  dividends  declared? 


BOOKKEEPING  71 

32.  Against  whom  may  creditors  bring  suit  for  recovery  for  their  loss  on  account  of  dividends  being 
paid  out  of  capital? 

33.  In  whom  is  the  management  of  a  corporation  vested? 

34.  How  are  they  appointed? 

35.  By  whom  are  their  instructions  carried  out? 

36.  On  what  matters  may  stockholders  usually  vote? 

37.  What  special  voting  privileges  are  granted  to  stockholders  in  Illinois  corporations? 

38.  Into  what  two  general  divisions  are  the  powers  of  a  corporation  classified? 

39.  Name  at  least  five  incidental  powers. 

40.  Chartered  powers.     What  two  kinds  are  there? 

41.  Give  at  least  five  illustrations  of  each. 

42.  What  is  meant  by  the  "power  of  succession"? 

43.  To  what  extent  only  may  a  corporation  purchase  and  hold  real  estate,  except  by  special  pro- 
vision of  the  charter? 

44.  How  may  a  corporation  act  as  an  individual? 

45.  What  are  by-laws? 

46.  What  remedy  has  a  corporation  against  a  stockholder  who  is  a  debtor  of  the  corporation? 

47.  What  is  cumulative  voting? 

48.  Show  how  cumulative  voting  protects  the  minority  stockholders. 

49.  Under  what  conditions  may  a  corporation  endorse  or  guarantee  commercial  paper? 

50.  To  what  extent  is  a  stockholder  generally  liable  to  corporate  creditors? 

51.  To  what  extent  is  a  stockholder  in  a  national  bank  liable  to  corporate  creditors? 

52.  Upon  what  must  a  creditor  of  a  corporation  rely  for  payment? 

53.  Upon  what  knowledge  must  he  rely  in  extending  credit  to  the  corporation? 

54.  What  are  the  four  classes  of  corporation  records? 

55.  In  what  respect  is  corporation  accounting  like  the  accounting  of  any  other  business? 

56.  What  records  must  be  kept  in  corporation  accounting  that  are  not  kept  in  an  ordinary  business? 

57.  Name  the  three  principal  books  for  stock  records. 

58.  Name  two  auxiliary  stock  record  books. 

59.  What  is  the  purpose  of  the  minute  book? 

60.  What  is  the  object  of  the  capital  stock  account? 

61.  Where  are  individual  investments  of  stockholders  shown? 

62.  What  is  the  entry  when  capital  stock  is  all  paid  in  cash? 

63.  What  entries  must  be  kept  when  the  capital  stock  is  all  subscribed  for  but  only  a  part  paid 
in  cash? 

64.  What  is  the  entry  in  case  capital  stock  is  not  fully  subscribed  for  and  the  subscription  not  fully 
paid  in  cash? 

65.  What  is  promotion  expense? 

66.  What  is  the  purpose  of  the  stock  discount  account? 

67.  Is  a  credit  to  a  customer's  account  on  account  of  stock  discount  valid  as  against  creditors  of 
the  corporation? 

68.  What  special  accounts  are  required  by  the  plan  of  the  distribution  of  the  profits  of  a  corporation? 

69.  What  is  a  bond  and  under  what  circumstances  is  it  issued? 

70.  What  is  a  debenture  bond? 

71.  What  are  mortgage  bonds? 

72.  What  is  the  purpose  and  use  of  the  Sinking  Fund  Assets  account? 

73.  What  is  the  distinction  between  the  Sinking  Fund  Assets  account  and  the  Sinking  Fund  Re- 
serve account? 

74.  What  entry  is  made  to  close  the  Sinking  Fund  Assets  account? 

75.  What  entry  is  made  to  close  the  Sinking  Fund  Reserve  account? 

76.  Under  what  four  conditions  may  a  corporation  be  dissolved? 

77.  What  is  done  with  the  assets  of  a  corporation  when  it  is  dissolved? 

78.  What  closing  entries  are  usually  necessary  on  the  dissolution  of  a  corporation? 

79.  What,  in  general,  is  the  order  of  precedence  among  investors  when  assets  are  distributed  among 
them? 


72  BOOKKEEPING 

Corporation  Forms 

On  pages  8,  9  and  21  are  illustrations  of  three  very  important  corporation  forms:  The  certificate 
of  incorporation,  the  certificate  of  stock,  and  the  coupon  bond.  You  are  urged  to  study  these  forms  care- 
fully.    Read  every  word  of  them.     You  will  thus  learn  more  about  them  than  you  could  in  any  other  way. 

The  certificate  of  incorporation  shown  is  issued  to  a  corporation  only  after  the  commissioners  have 
filed  with  the  Secretary  of  the  State  of  Illinois  proofs  that  the  laws  of  incorporation  have  been  complied 
with  in  every  respect.     Note  the  formal  wording  of  this  document. 

Certificates  of  stock  are  printed  and  issued  by  the  corporation  to  its  stockholders.  They  are  usually 
bound  together,  each  being  attached  to  a  stub  as  shown  in  the  illustration.  As  they  are  issued,  the  cer- 
tificate is  torn  away  from  the  stub  and  delivered  to  the  stockholder,  a  record  of  the  important  facts  being 
made  on  the  stub  at  the  same  time.  Sometimes  the  stub  is  posted  from.  Note  that  there  is  a  space  on 
the  stub  for  the  shareholder's  receipt. 

Coupon  Bond.  It  is  a  first  mortgage  bond  because  there  exists  no  prior  lien  on  the  property  pledged 
for  its  redemption.  It  is  a  gold  bond  because  it  is  ultimately  to  be  redeemed  in  gold.  The  interest  is 
also  payable  in  gold.  It  is  a  coupon  bond  because  it  is  accompanied  by  coupons  (at  the  right  in  the  illus- 
tration), which  are  to  be  clipped  off  and  presented  when  the  interest  falls  due.  It  is  a  trust  bond  because 
the  company's  property  is  deeded  in  trust  to  a  Trustee  for  its  redemption.  Note  the  resemblance  of  the 
wording  of  a  bond  to  that  of  a  promissory  note. 

Questions  on  Corporation  Forms 

The  answers  will  be  found  by  reading  the  forms  on  pages  8,  9  and  21. 

1.  In  accordance  with  what  act  and  amendments  must  a  statement  be  filed  before  incorporation? 

2.  What  must  be  issued  to  commissioners  before  subscriptions  for  a  corporation  may  be  secured? 

3.  Who  has  power  to  certify  that  a  corporation  has  been  formed  according  to  law? 

4.  What  facts  are  recorded  on  the  Stock  Certificate  stub? 

5.  Where  and  how  may  the  above  Stock  Certificate  be  transferred? 

6.  Who  is  named  as  Trustee  in  the  bond,  and  what  are  his  powers? 

7.  What  may  the  holder  of  the  Bond  shown  do  if  interest  is  not  paid? 

8.  How  may  the  holder  of  the  bond  get  rid  of  it  to  the  company? 

9.  Does  the  company  reserve  the  right  to  call  the  bond  in? 

10.  On  what  dates  are  the  interest  coupons  payable? 

11.  Where  is  the  interest  payable? 


OUTLINES  OF  PROCESSES  OF  INCORPORATION  IN  THE 
VARIOUS  STATES 


ALABAMA 

1.  Certificate  signed  by  all  subscribers.  1 

2.  Certificate  filed  with  and  recorded  by  probate  judge  of 

county,  2 

3.  Certificate  of  registration  endorsed  thereon  by  probate 

judge. 

4.  Statement  signed  by  said  judge  filed  with  Secretary  of 

State  together  with  proofs  of  compliance  with  stat-       i 
utory  regulations. 
Existence  commences  after  step  2  and  payment  of  fees       2, 

ALASKA  4 

1.  Incorporators  sign  and  acknowledge  articles  of  incor-       5, 

poration  in  triplicate. 

2.  One  copy  filed  with  Secretary  of  District  of  Alaska.       6, 

One  copy  filed  with  clerk  of  district  court.     One 
copy  retained.  7. 

ARIZONA 

1.  Articles  signed  and  acknowledged. 

2.  Articles  recorded  with  county  recorder.  | 

3.  Certified  copy  thereof   filed  with    Territorial    Auditor.       * 

4.  Articles  published  in  newspaper  and  affidavit  thereto       * 

filed  with  Auditor. 
Existence  commences  after  step  3.  4 

ARKANSAS 

1.  Articles  of  association  signed  by  all  incorporators. 

2.  Organization  effected.  o 

3.  Copy  of  articles  of  incorporation,  and  a  certificate  of 

organization  filed  with  and  recorded  by  county  clerk. 

4.  Articles  and  certificate,  endorsed  by  county  clerk,  filed 

with  Secretary  of  State. 

5.  Secretary  of  State  issues  Certificate  of  Incorporation. 
Existence  commences  after  step  2. 

CALIFORNIA  !• 

1.  Articles  signed  and  acknowledged  by  all  incorporators.        2 

2.  Articles  filed  with  county  clerk  and  certified  copy  there-       3' 

of  filed  with  Secretary  of  State  after  payment  of  fees.       V 

3.  Certificate  that  above  has  been  done  issued  by  Secre- 

tary of  State. 

COLORADO 

1.  Certificates  signed  and  acknowledged   by   all  incorpo- 

rators. 1. 

2.  An  original  certificate  filed  in  each  county  where  prin- 

cipal business  is  to  be  carried  on,  and  with  Secretary       2. 
of  State.  3. 

3.  Certificate  of  authority  to  transact  business  issued  by 

Secretary  of  State.  4. 

4.  Certificates  of  compliance  with  statutory  regulations 

must  be  filed  in  all  offices  where  original  certificates       5. 
were  filed.  6. 

Existence  commences  after  step  2  and  payment  of  fees. 

CONNECTICUT  ! 

1.  Certificate  signed  and  sworn  to  by  all  incorporators. 

2.  Certificate  filed  with  Secretary  of  State.  •  2. 

3.  Certificate  "approved"   and  recorded  by  Secretary  of 

State. 

4.  Copy  of  above,  certified  by  Secretary  of  State,  filed       3. 

with  town  clerk. 

5.  Statutory  provisions  as  to  organization  complied  with.       4. 
Existence  commences  after  step  3.     Business  may  be 

commenced  after  step  5. 

DELAWARE 

1.  Certificate   signed,    sealed,    and   acknowledged   by   all 

original  subscribers.  1. 

2.  Original  certificate  filed  with  Secretary  of  State. 

3.  Certified  copy  thereof  recorded  by  County  Recorder  of       2. 

Deeds.  3. 

4.  Organization  tax  paid  to  Secretary  of  State. 

73 


DISTRICT  OF  COLUMBIA 

Charter  subscribed  and  acknowledged  by  all  incorpo- 
rators. 

Charter  filed  with  district  recorder  of  deeds  after  proofs 
of  compliance  with  laws  have  been  submitted  to  him. 

FLORIDA 

Charter  subscribed  and  acknowledged  by  all  incorpo- 
rators. 

Publication  through  newspaper. 

Charter  filed  with  Secretary  of  State. 

Charter  submitted  to  Governor. 

Letters  patent  issued  by  Governor  after  statutory  regu- 
lations have  been  complied  with. 

Certified  copy  of  charter  issued  to  corporation  by  Secre- 
tary of  State  upon  receipt  of  fees. 

Letters  patent  and  certified  copy  of  charter  filed  with 
county  clerk. 

GEORGIA 


Petition  published  in  newspaper. 
Petition  granted  by  court  order. 
The  petition  and  the  court's  order  recorded  by  clerk  of 

Superior  Court. 
Statutory  provisions  complied  with. 

HAWAII 

Incorporators  sign  and  acknowledge  articles  of  associa- 
tion. 

Articles  of  association  recorded  with  Treasurer  of  Ter- 
ritory accompanied  by  proofs  of  compliance  with 
statutory  provisions. 

Existence  commences  when  statutory  provisions  have 
been  complied  with. 

IDAHO 

Articles  subscribed  and  acknowledged  by  all  incor- 
porators. 

Articles  filed  with  county  recorder. 

Certified  copy  thereof  filed  with  Secretary  of  State. 

Secretary  of  State  issues  certificate  that  above  has  been 
done. 

Corporation  may  commence  business  after  step  3. 

ILLINOIS 

Statement  signed  and  acknowledged  by  all  incorpo- 
rators. 

Statement  filed  with  Secretary  of  State. 

License  to  solicit  subscription  issued  by  Secretary  of 
State. 

Proofs  of  compliance  with  statute  forwarded  to  Secre- 
tary of  State. 

Certificate  of  Incorporation  issued  by  Secretary  of  States 

Above  certificate  recorded  with  county  recorder. 

INDIANA 
Articles  of  association  signed  and  acknowledged  by  all 

incorporators. 
Articles  filed  with  Secretary  of  State,  accompanied  by 

statement    of   proposed    plan,    and    fees.     Copy   of 

articles  filed  with  State  Auditor. 
Certificate   of    Incorporation   issued    by    Secretary    of 

State. 
Duplicate  of  articles  filed  with  county  recorder. 
Manufacturing  and  mining  companies  file  the  original 

articles  with  the  county  recorder  and  the  duplicate 

with  the  Secretary  of  State. 

IOWA 

Articles  of  Incorporation  signed  and  acknowledged  by 
incorporators. 

Articles  recorded  with  county  recorder. 

Articles  endorsed  by  recorder  and  forwarded  to  Secre- 
tary of  State  for  record,  with  fee. 


74 


OUTLINES   OF    PROCESSES   OF   INCORPORATION   IN  THE  VARIOUS   STATES 


4.  Publication  in  newspaper  and  proof  of  publication  filed 
with  Secretary  of  State. 
Existence  commences  after  step  3. 

KANSAS 

1.  Petition  for  charter  presented  to  State  Charter  Board 

with  application  fee. 

2.  Certificate  issued  by  Secretary  of  Board  authorizing 

incorporation. 

3.  Charter  prepared  according  to  law. 

4.  Charter  signed  and  acknowledged  by  at  least  five  incor- 

porators. 

5.  Charter  filed  with  Secretary  of  State,  with  fee. 

6.  Certified  copy  of  charter  issued  to  corporation  by  Secre- 

tary of  State. 
Business  may  be  commenced  after  step  5  if  proofs  of 
compliance  with  laws  have  been  filed  with  Secretary 
of  State. 

KENTUCKY 

1.  Articles  of  Incorporation  signed  and  acknowledged  by 

all  incorporators. 

2.  Articles  recorded  with  county  clerk. 

3.  Copy  thereof  filed  with  and  recorded  by  Secretary  of 

State. 

4.  Proofs  of  compliance  with  law  forwarded  to  Secretary 

of  State. 

LOUISIANA 

1.  Articles  signed  and  acknowledged. 

2.  Charters  for  commercial    and  manufacturing  corpora- 

tions recorded  with  recorder  of  mortgages  for  parish, 
with  subscription  list. 

3.  Publication  in  newspapers. 

4.  Certified  copy  of  charter  filed  with  Secretary  of  State, 

together  with  proofs  of  steps  2  and  3. 

MAINE 

1.  Articles  of  association  signed  by  incorporator? 

2.  Organization  effected  according  to  statutory  specifica- 

tions. 

3.  Certificate   of   organization   signed   and   sworn   to   by 

president  and  majority  of  directors,   submitted  to 
Attorney  General  and  approved  by  him. 

4.  Above  recorded  in  office  of  register  of  deeds. 

5.  Copy,  certified  by  register  of  deeds,  filed  with  Secretary 

of  State. 

MARYLAND 

1.  Charter,  executed  and  acknowledged,  submitted  to  one 

of  the  cricuit  judges  of  the  county.   (In  Baltimore,  to 
one  of  the  judges  of  the  Supreme  Bench.) 

2.  Above,  certified  by  the  said  judge,  filed  with  circuit 

clerk  of  the  county.    (In  Baltimore,  with  the  clerk  of 
the  Superior  court.) 

3.  Copy  of  charter  forwarded  to  State  Tax  Commissioner 

with  fee. 

MASSACHUSETTS 

1.  Incorporators  sign  agreement  of  association. 

2.  Organization  effected. 

3.  Articles  of  organization  signed  and  sworn  to  by  major- 

ity of  directors. 

4.  Articles  of  Organization  and  proofs  of  compliance  with 

statutory   provisions   certified   by   commissioner   of 
corporations. 

5.  Articles,    certified   as   above,   filed   with   Secretary   of 

State  of  the  Commonwealth. 

6.  Certificate  of  Incorporation  issued  by  Secretary  of  State 

of  the  Commonwealth. 

MICHIGAN 

1.  Articles  of  association  signed  and  acknowledged  by  all 

incorporators. 

2.  Organization  effected. 

3.  Articles  recorded  with  Secretary  of  State  and  clerk  of 

county. 
Existence  commences  after  step  2.     Business  may  be 
begun  only  after  step  3. 

MINNESOTA 

1.  Articles  signed  and  acknowledged  by  all  incorporators. 

2.  Articles  published  in  newspaper. 

3.  Proof  of  step  2  filed  with  Secretary  of  State. 

4.  Articles  recorded  with  county  register  of  deeds. 

6.  Articles  filed  with  Secretary  of  State,  together  with 
proofs  of  compliance  with  statute,  and  State  Treas- 
urer's receipt  for  tax. 


6.  Certificate  of  Incorporation  issued  by  Secretary  of  State. 
Existence  commences  after  step  3 ;  but  for  mining  and 
manufacturing  corporations  not  till  after  step  5. 

MISSOURI 

1.  Articles  signed  and  acknowledged  by  the  incorporators. 

2.  Articles  recorded  with  county  or  city  recorder  of  deeds. 

3.  Certified  copy  of  articles  filed  with  Secretary  of  State, 

together  with  duplicate  of  State  Treasurer's  receipt 
for  fee. 

4.  Certificate  that  corporation  has  been  duly  organized 

issued  by  Secretary  of  State. 

5.  Certified  copy  of  above  recorded  with  county  recorder 

of  deeds. 
Existence  begins  after  step  3. 

MONTANA 

1.  Articles  signed  and  acknowledged   by  all  incorporators. 

2.  Articles  filed  with  county  clerk. 

3.  Certified  copy  of  above  filed  with  Secretary  of  State. 

4.  Certificate  that  step  3  has  been   done  issued  by  Secre- 

tary of  State. 

NEBRASKA 

1.  Articles  of  incorporation  signed  by  all  incorporators, 

and  acknowledged. 

2.  Articles  filed  with  Secretary  of  State,  with  fee. 

3.  Also  filed  with  county  clerk. 

NEVADA 

1.  Articles  signed  and  acknowledged  by  the  corporators. 

2.  Articles  filed  and  recorded  by  county  clerk. 

3.  Certified  copy  filed  and  recorded  by  Secretary  of  State, 

with  fee. 

4.  Certificate  that  this  has  been  done  issued  by  Secretary 

of  State. 

NEW  HAMPSHIRE 

1.  Articles  recorded  by  town  clerk. 

2.  Articles  recorded  by  Secretary  of  State. 

3.  Charter  fee  paid  to  State  Treasurer. 

4.  Organization  perfected. 

NEW  JERSEY 

1.  Certificate  of  Incorporation  proved  and  acknowledged 

as  required  for  deeds  of  real  estate. 

2.  Three  copies  of  above  made.     One  filed  with  county 

clerk  and  recorded  by  him.  Two  certified  by  county 
clerk  and  forwarded  to  Secretary  of  State.  One  of 
these  retained  by  Secretary  of  State;  one  certified 
by  him  and  returned  to  incorporators. 

NEW  MEXICO 

Certificate  of  Incorporation  signed  by  all  original  sub- 
scribers. 

Certificate  acknowledged  as  for  deeds  of  real  estate. 

Above  filed  with  Secretary  of  the  Territory. 

Copy  thereof,  certified  by  Secretary  of  the  Territory, 
recorded  by  county  recorder. 

Publication. 

Proof  of  publication  filed  with  Secretary  of  State. 

Existence  commences  after  step  4. 

NEW  YORK 
Certificate  of  Incorporation  acknowledged  by  all  incor- 
porators. 
Above  filed  with  and  recorded  by  Secretary  of  State. 
Certified  copy  filed  with  county  clerk,  with  receipt  for 

NORTH  CAROLINA 

Certificate  signed  and  acknowledged  by  all  incorpor- 
ators. 

Above  filed  and  recorded  with  Secretary  of  State  after 
payment  of  fees. 

Certified  copy  of  the  certificate  and  probate  recorded 
with  clerk  of  County  Superior  Court. 

NORTH  DAKOTA 

Charter  subscribed  and  acknowledged  by  all  incor- 
porators. 

Articles  filed  with  Secretary  of  State  together  with 
duplicate  of  State  Treasurer's  receipt  for  fees. 

Certificate  of  Incorporation  issued  by  Secretary  of 
State. 

OHIO 

Articles  signed  and  acknowledged  by  all  Incorporators. 

Above  filed  with  Secretary  of  State. 

When  statutory  requirements  have  been  complied  with 
and  it  is  so  certified  to  the  Secretary  of  State  the 
corporation's  existence  commences. 


OUTLINES   OF   PROCESSES   OF   INCORPORATION   IN   THE   VARIOUS   STATES 


75 


OKLAHOMA 

1.  Articles  subscribed  and  acknowledged  by  all  incorpo- 

rators. 

2.  Articles  filed  with  and  recorded  by  Secretary  of  Terri- 

tory.* 

3.  Certificate  that  this  has  been  done  issued  by  Secretary 

of  Territory. 
*  Under  the  new  State  Constitution  (1907)  a  corporation 
may  not  commence  business  until  a  statement  is  filed  with 
the  State  Corporation  Commission,  with  fees. 

OREGON 

1.  Articles    subscribed    and    acknowledged    by    incorpor- 

ators, in  triplicate. 

2.  One  copy  filed  with  Secretary  of  State.     One  copy  filed 

with  county  cerk.     One  copy  retained  by  corpora- 
tion. 

4.  Certificate    of    incorporation    issued    by    Secretary    of 

State  when  fees  have  been  paid. 

PENNSYLVANIA 

1.  Certificate  subscribed   and   acknowledged   by   two  or 

more  incorporators  and  sworn  to. 

2.  Publication  in  newspaper. 

3.  Proof  of  publication  filed  with  Secretary  of  State. 

4.  Certificate  of  organization  filed  with  Secretary  of  State. 

5.  Certificate  and  proof  of  publication  forwarded  to  Gov- 

ernor. 

6.  Governor  endorses  above,  and  issues  Letters  Patent. 

7.  Certificate  recorded  with  Secretary  of  State  and  regis- 

tered with  Auditor  General. 

8.  Above  recorded  with  county  recorder  of  deeds. 
Q.  Statement  filed  with  Auditor  of  Commonwealth. 

RHODE  ISLAND 
1    Agreement  signed  by  incorporators  and  jointly  acknowl- 
edged by  them. 

2.  Agreement  filed  with  Secretary  of  State  with  receipt 

for  fees. 

3.  Certificate   of   Incorporation   issued   by   Secretary   of 

State. 
Business  may  be  commenced  after  step  2. 

SOUTH  CAROLINA 

1.  Petition  signed  and  acknowledged  by  incorporators. 

2.  Petition  recorded  by  Secretary  of  State. 

3.  Commission  to  solicit  subscription  authorized  by  Secre- 

tary of  State. 

4.  Proofs  of  compliance  with  requirements  of  law  filed 

with  Secretary  of  State. 

5.  Charter  issued  by  Secretary  of  State  after  payment  of 

fees. 

6.  Copy  of  charter  recorded  by  register  of  conveyances  or 

clerk  in  each  county  where  the  corporation  has  a 
business  office. 

SOUTH  DAKOTA 

1.  Certificate  signed  and  acknowledged  by  incorporators. 

2.  Two  incorporators  swear  that  the  corporation  does  not 

seek  to  avoid  anti-trust  laws. 

3.  Certificate  filed  and  recorded  with  Secretary  of  State. 

4.  Certificate    of    Incorporation   issued    by    Secretary    of 

State. 

TENNESSEE 

1.  Incorporators  sign  and  acknowledge  execution  of  char- 

ter, which  is  in  reality  a  petition. 

2.  Above  is  recorded  in  county  and  state  offices. 

3.  Secretary  of  State  issues  certificate  of  registration. 

4.  Certificate  of  registration  filed  with  county  register. 


TEXAS 

Articles  subscribed  by  all  incorporators,  and  acknowl- 
edged by  them. 

Articles  filed  with  Secretary  of  State  after  payment  of 
fees  and  proof  of  compliance  vvith  laws. 

UTAH 

Agreement  subscribed  by  all  incorporators  and  acknowl- 
edged by  three  or  more. 

Agreement'  and  proofs  of  compliance  with  statutes 
governing  organization  filed  with  county  clerk. 

County  clerk  certifies  to  step  2. 

Above  certification  and  copies  of  proofs  of  compliance 
with  statutes  filed  with  Secretary  of  State. 

Secretary  of  State  certifies  that  this  has  been  done. 

VERMONT 

Articles  subscribed  by  all  incorporators. 

Articles  submitted  to  Secretary  of  State,  and  recorded 
by  him. 

Certified  copy  thereof  recorded  by  town  clerk. 

Existence  cannot  commence  until  after  payment  of 
fees. 

VIRGINIA 

Certificate  of  incorporation  subscribed  by  incorporators. 

Above  certified  by  judge  of  corporation,  circuit,  or 
chancery  court. 

Organization  tax  paid. 

Certificate  certified  by  State  Corporation  Commission 
and  forwarded  to  Secretary  of  Commonwealth. 

Above  recorded  by  Secretary  of  Commonwealth  and 
certified  by  him. 

Recorded  by  clerk  of  county  circuit  court  or  citv  cor- 
poration court  and  endorsed  by  him.  (In  Rich- 
mond, by  clerk  of  chancery  court.) 

Filed  with  clerk  of  State  Corporation  Commission. 

Existence  commences  after  step  4. 

WASHINGTON 
Incorporators   subscribe   and   acknowledge   articles   of 

incorporation  in  triplicate. 
One  copy  filed  with  Secretary  of  State.     One  copy  filed 

with  county  auditor.     One  copy  retained. 
Proofs  of  compliance  with  statutes  filed  with  county 

auditor. 

WEST  VIRGINIA 
Agreement  of  incorporation  signed  and  acknowledged 

by  all  five  incorporators. 
Application  to  Secretary  of  State. 
Certified  copy  of  above  recorded  with  county  clerk. 

WISCONSIN 

Articles  of  association  signed  and  acknowledged. 

Verified  copy  of  above  filed  with  Secretary  of  State 
with  organization  tax. 

Above,  certified  by  Secretary  of  State,  filed  with  reg- 
ister of  deeds. 

Certification  of  above  filing  forwarded  to  Secretary  of 
State. 

Certificate  of  Incorporation  issued  by  Secretary  of 
State. 

WYOMING 

Duplicate  certificate  of  incorporation  signed  and 
acknowledged  by  incorporators. 

One  copy  filed  with  county  clerk.  One  copy  filed  with 
Secretary  of  State. 

Publication  in  newspapers. 

Proof  of  publication  filed  with  Secretary  of  State,  to- 
gether with  fee  for  filing. 


76 


BOOKKEEPING 


CORPORATION  LAWS  IN  THE  VARIOUS  STATES 


Alabama 

Alaska 

Arizona 

Arkansas 

California 

Colorado 

Connecticut. . .    .  . 

Delaware 

District  Columbia 

Florida 

Georgia 

Hawaii 

Idaho 

Illinois 

Indiana 

Iowa 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts. . . . 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Nevada 

New  Hampshire. . 

New  Jersey 

New  Mexico 

New  York 

North  Carolina.  . 
North  Dakota  — 

Ohio 

Oklahoma 

Oregon 

Pennsylvania.  .  . 
Rhode  Island 
South  Carolina.  . 
South  Dakota. . . 

Tennessee 

Texas 

Utah 

Vermont 

Virginia 

Washington 

West  Virginia. .  . 

Wisconsin 

Wyoming 


cp     "cS 

lltJa 

S^  o 

S^l   CD 

<s.22o2 

sal 
ill 

'3 .3  2 

GO 

*s" 

S.30 

ill 

n  a   . 

Ill 

c  e  a 

.5  o  a> 

jrcentage  of  Cap. 
Stock  to  be  sub- 
scribed before 
commencing 
business. 

N  eu 
X  o  S 

•11 

as  §3 

oes  statute  confer 
power  to  pur- 
chase stock  in 
other  corpora- 
tions? 

oes  statute  confer 
power  to  consoli- 
date with  other 
corporations? 

£ 

i 

S 

9 

Pm 

Q 

Q 

Q 

No 

3 

Any  amt 

20% 

25% 

Yes 

Yes 

Yes 

No 

3 

Any  amt 

No  limit 

None 

No 

No 

No 

No 

2 

Any  amt 

No  limit 

None 

No 

No 

No 

Yes 

3 

$25 

No  limit 

None 

Yes 

No 

No 

No 

3 

Any  amt 

No  limit 

None 

No 

No 

Yes 

No 

3 

$1  to  $100 

No  limit 

None 

No 

No 

Yes 

No 

3 

Min.  $25 

$1000 

$1000 

Yes 

Yes 

Yes 

No 

3 

Any  amt 

$1000 

$1000 

Yes 

Yes 

Yes 

No 

3 

Any  amt 

10% 

10% 

No 

Forbidden 

No 

No 

3 

Min.  $10 

10% 

10% 

No 

No 

No 

No 

2 

Any  amt 

10% 

10% 

No 

Yes 

No 

No 

5 

Any  amt 

10% 

75% 

Yes 

No 

No 

No 

3 

Any  amt 

No  limit 

None 

No 

No 

No 

Yes 

3  to  7 

$10  to  $100 

No  limit 

All 

No 

Yes,  lmtd 

Yes 

Yes 

3 

Max.  $100 

No  limit 

None 

Yes 

Yes,  lmtd 

Yes 

No 

1 

Any  amt 

No  limit 

None 

No 

No 

No 

No 

5 

Any  amt 

20% 

20% 

Yes 

No 

No 

No 

3 

Any  amt 

No  limit 

50% 

Yes 

No 

Yes 

No 

3 

Any  amt 

No  limit 

None 

No 

No 

Yes 

No 

3 

Any  amt 

No  limit 

None 

Yes 

Yes 

Yes 

No 

5 

Any  amt 

No  limit 

None 

Yes 

No 

Yes 

No 

3 

Min.  $5 

No  limit 

None 

Yes 

No 

No 

No 

3 

$10  to  $100 

10% 

50% 

Yes 

No 

No 

No 

3 

$1  to  $100 

No  limit 

None 

Yes 

No 

No 

No 

2 

Any  amt 

No  limit 

None 

No 

No 

No 

Yes 

3 

Any  amt 

50% 

All 

Yes 

No 

Yes 

No 

3 

Any  amt 

No  limit 

None 

Yes 

No 

Yes 

No 

1 

Any  amt 

No  limit 

None 

No 

No 

No 

No 

3 

Any  amt 

No  limit 

$1000 

Yes 

Yes 

Yes 

No 

5 

$25  to  $500 

No  limit 

None 

Yes 

No 

No 

No 

3 

Any  amt 

$1000 

$1000 

Yes 

Yes 

Yes 

No 

3 

Any  amt 

$2000 

$2000 

Yes 

Yes 

Yes 

No 

3 

$5  to  $100 

$500 

$500 

Yes 

Yes 

Yes 

No 

3 

Any  amt 

No  limit 

None 

Yes 

No 

No 

NO 

3 

Any  amt 

No  limit 

None 

No 

No 

No 

No 

5 

Any  amt 

No  limit 

10% 

Yes 

Yes,  lmtd 

Yes 

No 

3 

Any  amt 

No  limit 

None 

No 

No 

No 

No 

3 

Any  amt 

No  limit 

50% 

No 

No 

Yes,  lmtd 

No 

3 

Max.  $100 

10% 

10% 

Yes 

Yes 

Yes 

No 

3 

Any  amt 

No  limit 

None 

Yes 

No 

No 

No 

2 

Any  amt 

20% 

50% 

Yes 

No 

No 

No 

3 

Any  amt 

No  limit 

None 

No 

No 

Yes 

No 

5 

Max   $100 

No  limit* 

None 

Yes 

Yes 

Yes 

No 

3 

Any  amt 

10% 

50% 

Yes 

No 

No 

Yes 

5 

Any  amt 

10% 

10% 

Yes 

No 

Yes 

No 

5 

Max.  $100 

25% 

25% 

No 

No 

No 

No 

3 

Any  amt 

No  limit 

Min.  Cap. 

Yes 

Yes 

Yes 

No 

2 

Any  amt 

No  limit 

All 

No 

Yes 

No 

No 

5 

Any  amt 

10%  of  sub 

5  shares 

Yes 

Yes 

Yes 

No 

3 

Any  amt 

20% 

50% 

Yes 

Yes 

No 

No 

3 

Any  amt 

No  limit 

None 

Yes 

Yes 

No 

*  Except  Brewery  Co.'s. 


BOOKKEEPING 


77 


CORPORATION  LAWS  IN  THE  VARIOUS  STATES 


States 


a 

Pit 

8111 

3  «>-OGQ 

h 

~  S 

*  s 
83 

oes  statute  im- 
pose any  liability 
upon  subscribers 
beyond  unpaid 
subscription? 

jes  statute  pro- 
vide that  Cap. 
Stock  is  payable 
in  services  and 
property? 

n 

CO 

Q 

Q 

Yes 

No 

No 

Yes 

No 

No 

No 

Yes 

No 

No 

No 

No 

Yes 

No 

No 

Yes 

No 

Yes 

Yes 

Yes 

No 

Yes 

No 

Yes 

Yes 

Yes 

No 

Yes 

No 

Yes 

No 

Yes 

No 

No 

No 

Yes 

No 

No 

No 

Yes 

Yes 

No 

No 

No 

No 

,No 

No 

Yes 

No 

No 

No 

Yes 

No 

Yes 

No 

No 

Yes 

No 

Yes 

No 

No 

No 

No 

Yes 

No 

Yes 

No 

No 

No 

Yes 

No 

Yes 

No 

No 

No 

Yes 

No 

No 

No 

Yes 

No 

Yes 

No 

Yes 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

No 

No 

Yes 

No 

No 

No 

Yes 

No 

Yes 

No 

Yes 

No 

Yes 

No 

Yes 

No 

No 

No 

Yes 

No 

Yes 

No 

No 

No 

Yes 

Yes 

Yes 

No 

Yes 

No 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

No 

Yes 

No 

Yes 

Yes 

Yes 

No 

Yes 

No 

Yes 

No 

No 

Yes 

Yes 

No 

No 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

No 

Yes 

No 

Yes 

Yes 

Yes 

No 

No 

Yes 

Yes 

No 

No 

No 

Yes 

Yes 

No 

No 

Yes 

Yes 

No 

No 

No 

No 

Yes 

No 

Yes 

No 

No 

No 

Yes 

No 

Yes 

No 

Yes 

No 

No 

Yes 

Yes 

No 

No 

No 

Yes 

■d 

<v 

OS 

ill 

•§•->> 

9 

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CO  kg 
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2  5  •a 

■$■*$ 

g.2w 
< 

3 

No 

No 

3 

No 

No 

1 

No 

No 

3 

No 

No 

3 

No 

No 

3  to  13 

No 

No 

3 

Yes 

No 

3 

Yes 

No 

3  to  15 

No 

Yes 

1 

No 

Yes 

1 

No 

No 

1 

No 

No 

3  to  15 

Yes 

Yes 

5  to  11 

Yes 

Yes 

3  to  13 

No 

Yes 

1 

No 

No 

3  to  24 

No 

No 

3 

Yes 

Yes 

1 

No 

No 

3 

Yes 

No 

4  to  12 

No 

No 

3 

Yes 

No 

3 

No 

Yes 

3  to  15 

Yes 

Yes 

1 

No 

No 

3  to  13 

Yes 

No 

3  to  13 

No 

Yes 

1 

No 

Yes 

3 

Yes 

No 

3 

No 

No 

3 

Yes 

No 

3 

Yes 

No 

3 

Yes 

No 

3 

Yes 

No 

3  to  11 

No 

No 

5  to  15 

No 

No 

3  to  11 

No 

No 

3 

No 

No 

3 

Yes 

Yes 

1 

No 

Yes 

1  to  9 

No 

No 

3  to  11 

No 

No 

5 

No 

No 

3  to  13 

No 

Yes 

3  to  25 

No 

No 

3 

No 

No 

3 

Yes 

Yes 

2 

No 

No 

1 

No 

Yes 

3 

Yes 

Yes 

3  to  9 

No 

No 

£*>*-«  CD  C 

fill 


Alabama 

Alaska 

Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

District  Columbia 

Florida 

Georgia 

Hawaii 

Idaho. 

Illinois 

Indiana 

Iowa 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts. . . . 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Nevada 

New  Hampshire. . 

New  Jersey 

New  Mexico 

New  York 

North  Carolina. . . 

North  Dakota 

Ohio 

Oklahoma 

Oregon 

Pennsylvania 
Rhode  Island 
South  Carolina. . . 
South  Dakota.. . . 

Tennessee 

Texas 

Utah 

Vermont 

Virginia 

Washington 

West  Virginia 

Wisconsin 

Wyoming 


Unlmtd 
50  yrs 
25  yrs 
Unlmtd 
50  yrs 
20  yrs 
Unlmtd 
Unlmtd 
Unlmtd 
Unlmtd 
20  yrs 
50  yrs 
50  yrs 
99  yrs 
50  yrs 
20  yrs 
20  yrs 
Unlmtd 
99  yrs 
Unlmtd 
40  yrs 
Unlmtd 
30  yrs 
30  yrs 
50  yrs 
50  yrs 
20  yrs 
Unlmtd 
Unlmtd 
Unlmtd 
Unlmtd 
50  yrs 
Unlmtd 
Unlmtd 
20  yrs 
Unlmtd 
20  yrs 
Unlmtd 
Unlmtd 
Unlmtd 
Unlmtd 
20  yrs 
Unlmtd 
50  yrs 
3  to  100 
Unlmtd 
Unlmtd 
50  yrs 
50  yrs 
Unlmtd 
50  yrs 


No 

No 
No 
No 
No 
Forbidden 
Yes 
Yes 
No 
No 
No 
No 
No 
No 
No 
.  No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
No 
Yes 
Yes 
No 
No 
No 
No 
Yes 
No 
No 
No 
No 
Yes 
No 
No 
No 
No 
Yes 
No 
Yes 
No 
No 


Yes 
Yes 
No 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
No 
Yes 
Yes 
No 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
.Yes 
Yes 
Yes 
Yes 


78  BOOKKEEPING 

NEW  YORK   CHARTER 

We  present  herewith  the  form  of  the  New  York  Charter,  as  being  a  typical  form.  While  the  forms  for 
different  states  vary  in  detail,  many  state  charters  are  patterned  closely  after  the  New  York  charter,  and  it 
is  believed  that  the  form  here  shown  will  give  a  better  idea  of  a  corporation  charter  than  any  other  state 
form  which  could  be  presented. 

Certificate  of  Incorporation 

of  the 

DALTON  MANUFACTURING  COMPANY 

We,  the  undersigned,  all  being  of  full  age  and  two-thirds  being  citizens  of  the  United  States,  and  one 
of  us  a  resident  of  the  State  of  New  York,  for  the  purpose  of  forming  a  Corporation  under  the  Business  Cor- 
porations Law  of  the  State  of  New  York,  do  hereby  certify  and  set  forth: 

First — The  name  of  said  Corporation  shall  be 

"Dalton  Manufacturing  Company." 
Second — The  purposes  for  which  said  Corporation  is  formed  are  as  follows: 

1.  To  buy,  sell,  manufacture  and  generally  deal  in  all  manner  of  tools,  machinery,  devices, 
appliances  and  supplies  used  in  the  plumbing  trade. 

2.  To  lease,  buy,  sell,  use  and  hold  all  such  property,  real  or  personal,  as  may  be  necessary 
or  convenient  in  connection  with  the  said  business. 

3.  To  do  any  or  all  things  set  forth  in  this  certificate  as  objects,  purposes,  powers  or  other- 
wise, to  the  same  extent  and  as  fully  as  natural  persons  might  do,  and  in  any  part  of  the  world. 

Third — The  amount  of  Capital  Stock  of  said  Corporation  shall  be  Seventy-Five  Thousand  ($75,000) 
Dollars. 

Fourth — The  number  of  shares  composing  said  capital  stock  shall  be  Seven  Hundred  Fifty  (750)  Shares 
of  the  par  value  of  One  Hundred  ($100)  Dollars  each,  and  the  amount  of  capital  with  which  said  Corpora- 
tion will  begin  business  is  Seven  Hundred  Fifty  ($750)  Dollars. 

Fifth — The  principal  business  office  of  said  Corporation  shall  be  in  the  City,  County  and  State  of 
New  York. 

Sixth — The  duration  of  said  Corporation  shall  be  perpetual. 

Seventh — -The  number  of  directors  of  said  Corporation  shall  be  three. 

Eighth — The  names  and  postoffice  addresses  of  the  directors  of  said  Corporation  for  the  first  year  are 
as  follows: 

NAMES  ADDRESSES 

M.  M.  Dalton No.  656  Fifth  Ave.,  New  York  City. 

K.  V.  Handley No.  229  Broadway,  New  York  City. 

L.  D.  Peoples No.  629  Broad  St.,  Brooklyn,  N.  Y. 

Ninth — The  names  and  postoffice  addresses  of  the  subscribers  to  this  certificate,  and  the  number  of 
shares  of  stock  which  each  agrees  to  take  in  said  Corporation,  are  as  follows: 

NAMES  ADDRESSES  SHARES 

M.  M.  Dalton No.  656  Fifth  Ave.,  New  York  City 38 

K.  V.  Handley No.  229  Broadway,  New  York  City 15 

L.  D.  Peoples No.  629  Broad  St.,  Brooklyn,  N.  Y 15 

F.  C.  Keach Salem,  Mass 7 

Tenth — Pursuant  to  Section  40  of  the  Stock  Corporation  Law,  as  amended,  this  Corporation  shall  have 
power  to  purchase,  acquire,  hold  and  dispose  of  the  stocks,  bonds,  and  other  evidences  of  indebtedness  of 
any  corporation,  domestic  or  foreign,  and  issue  in  exchange  therefor  its  stocks,  bonds  or  other  obligations. 
In  Witness  Whereof,  we  have  made  and  signed  this  certificate  in  duplicate  this  four- 
teenth day  of  January,  one  thousand  nine  hundred  and  eight. 

M.  M.  Dalton. 
K.  V.  Handley. 
L.  D.  Peoples. 
F.  C.  Keach. 
State  of  New  York,         ) 
County  of  New  York      S  SS: 

Personally  appeared  before  me  this  14th  day  of  January,  1908,  M.  M.  Dalton,  K.  V.  Handley,  L.  D- 
Peoples  and  F.  C.  Keach,  to  me  personally  known  to  be  the  persons  described  in  and  who  executed  the 
foregoing  certificate,  and  severally  acknowledged  that  they  executed  the  same  for  the  purposes  therein 
set  forth. 

T.  J.  Adams, 
f  notarial  1  Notary  Public  for  New  York  County. 

I     seal.    / 


ABBREVIATIONS 


(Parentheses  indicate  plurals) 


a  or  @  or  at at 

A 1 1st  class 

Abbr abbreviation 

Acct.  or  %  (%'s) account 

A.  D Anno  Domini;  after  Christ 

Admr administrator 

Admx administratrix 

Adv adverb;   advertisement;  advocate 

Agt.   (Agts.) agent 

A.  M morning;  master  of  arts 

Am American 

Amt.   (Amts.) '. .amount 

Ans answer 

Ass'd assorted 

Asst assistant 

Atty attorney- 
Avoir avoirdupois 

Bal balance 

B.C before  Christ 

Bdls bundles 

B/L  (B's/L) Bill  of  Lading 

Bbl.  or  Brl.  (Brls.) barrel 

Bills  Rec.  or  B.  Rec bills  receivable 

Bills  Pay.  or  B.  Pay bills  payable 

Bk bank;  book 

B.  0 buyer's  option 

Bot bought 

Bro.  (Bros.)    brother 

Brot ' brought 

B/S bill  of  sale 

Bu.  (bu.) bushel 

Bxs boxes 

C 100 

0  or  cts cents 

Cap.  (Caps.)  chapter;  capital 

Cash  or  Cash'r cashier 

Cat catalog 

CB cash  book 

Chgd charged 

Ck.  (Cks.) check 

Clk clerk 

c/o care  of 

Co company 

CO.  D collect  on  delivery 


Coll collection 

Comm. commission 

Con contra;  other  side 

Const consignment 

C.  P.  A Certified  Public  Accountant 

Cr credit 

C.W.O cash  with  order 

Cwt hundredweight 

D.  B day  book 

Dep deposit 

Dept department 

Dft.   (Dfts.) draft 

Dis.  or  disct discount 

Do  or   " ditto;  the  same 

Doz dozen 

Dr debit;  doctor 

Dr'ge drayage 

Ea each 

EE errors  excepted 

E.  &  O.  E errors  &  omissions  excepted 

e.  g exempli  gratia;   for  example 

Esq.  (Esqs.) Esquire 

Et  al and  others 

Etc et  cetera;   and  so  on 

Exch exchange 

Exec executor 

Execx executrix 

Exp expense 

F.  or  Fol folio;  page 

Fir firkin 

F.O.  B free  on  board,  or  freight  on  board 

Ford forward 

Frt freight 

Ft foot  or  feet 

Gal gallon  or  gallons 

Gr gross;  grain 

G .  Gr great 


Hdkf handkerchief 

Hf.  ch.  or  £  ch half  chest 

Hhd hogshead 

Hon Honorable 


79 


80 


BOOKKEEPING 


I.  B.  i invoice  book 

i.  e id  est;  that  is 

in inch  or  inches 

Ins insurance 

Inst instant;  this  month 

Int interest 

In  trans in  transit 

Inv.  .  .  .   invoice 

Invt.  or  Invt'y inventory 

I.  O.  U I  owe  you 

J.  or  Jour journal 

J.  F journal  folio 

Jr junior 

L.  or  Ledg ledger 

L.  F ledger  folio 

L.  &  G loss  and  gain 

lbs.  $ pounds 

Lib librarian 

M noon 

M.  or  M-. 1,000 

Mdse merchandise 

Mem.  or  Memo memorandum 

Messrs messieurs;  pi.  of  mister 

Mfg.  or  M'f'g manufacturing 

Mgr manager 

Mile mademoiselle;  miss 

Mme madam 

Mmes pi.  of  madam 

Mo month 

Mr mister 

Mrs mistress 

MS.  (MSS.) manuscript 

Nat'l  or  Natl national 

N.  B nota  bene;   take  note 

No.  #  (Nos.) number 

O.  K all  correct 

Oz ounces 

Payt payment 

Pes pieces 

Pd paid 

Per.  .  ......\ by;  (not  an  abbr.) 

Per  cent by  the  hundred 

Pg---* Page 

Pk peck  or  pecks 

Pkg package 

P.  M postmaster;  afternoon 


pp pages 

Pr pair  or  pairs 

Prem premium 

Pres president 

Prox proximo;   next  month 

P.  S .  postscript 

Pi pint  or  pints 

Put.  or  Dwt pennyweight 

Qr quire;  quarter 

Qrs quarters 

Qt quart 

Reed received 

Retd returned 

R.  R.  or  Ry railroad;  railway 

S.  B sales  book 

SS steamship 

Sec second 

Secy,  or  Sec'y secretary 

Shipt shipment 

S.  O. ,  . seller's  option 

Sg square 

Sr Senior 

St saint;  street 

Str steamer 

Sunds sundries 

Supt superintendent 

Tp township 

Trans transportation 

Treas treasurer 

UU ultimo;   last  month 

Viz videlicet;  namely 

Vol volume 

V.  Pres vice  president 

Vs versus;    against 

W.  B way-bill 

Wk , week 

Wt weight 

Yr year 

Yd.  (Yds.) yard  } 

First,  Second,  Third  and  Fourth  are  abbreviated 
1st,  2d,  3d,  4th. 

I1,  l2,   l3,  mean,  respectively,  1{,  1-|,  and  If. 


iRPORATION  ACCOUNT! 


No,  *- ACCOUNTING  SEI 


J,  A.  LYC-^f. 


HICAG0 


mm 


mm: 


M513276 


